In some ways my grandparents are the most successful people I know, they got married at 18, had been married for 60+ years, and now I have a large family of 32 cousins. I owe so much to the opportunities I have had to them.

I was also able to get to know and spend significant time with them, because they got married young.

I think there is a danger that as a culture and a sector we are advising students in a way that is too one dimensional.

Nobody is paid to advise you to eat your vegetables, and everyone is paid to encourage you to seek greater freedom, delay, and keep spending on yourself.

I see many of our incentives actively eating into the family, and sometimes that is destructive and goes too far.

We should stop treating the delay as the default and family as the thing you fit in once everything else is done, and build societies and institutions where families can thrive.

Getting married and having families younger can give more years of overlap between generations which can strengthen the family structure, communities and societies.

It’s something that can’t be measured and often comes at great sacrifice but it is incredibly valuable.

You can also get huge growth and have a massive impact by responsibility, commitment and sacrifice, not just by greater independence and delay.

What does success mean to you?

There are lessons to learn from this in how university is priced and funded.

If we have perfect equality and equal willingness to pay then one standard price for everyone works best. But we know we don’t have perfect equality - especially in global markets.

In digital platforms - it makes more sense to segment the market - and to offer high value services to the small number who can pay a lot, and free, or heavily subsidised low cost services to the majority - that is because the market still benefits from the network effects, and captures the value in the high price point.

Charging a large number of lower priced customers small amounts is substantially harder than charging a small number of high budget students high amounts. Expectations are much higher - so it’s almost better and easier to not charge them at all.

How much should students pay for university tuition fees?

I think there are parallels in university pricing, and in my review of why UK universities are failing

The university model broke in many countries when university attendance increased to over 50% and new funding models were needed.

Choosing one fixed price for all students is not optimal pricing for the market because excludes those below that, and dis-prorportionally costs the middle - while leaving revenue on the table from higher earners.

One option is universities discriminating between those that can afford it and subsidising the others.

Or a university system divided into tiers with a higher private one with market prices, and a state subsidised university system.

But the difference between a tech platform and a modern university is that a platform can have near-zero marginal cost.

Therefore universities need to adapt the service for lower income students to offer near marginal lower cost, or find other ways to subsidise it - such as:

• through offering substantially higher prices and services to wealthier students

• creating a lower cost - delivery tier for lower income students

• private companies that recruit covering part of the training costs

• state subsidies to cover the added benefit that education gives to society

• a mixture of the above

In my opinion I think that the state should be the overriding architect of the system and substantially subsidise it, while also allowing free-market systems to develop along side it that should have no limit on pricing.

And the entire cost base of providing education can be reduced drastically with new technology there are many ways of reducing costs. There should also be a development of new and free education systems that are available online that can educate at near zero-marginal cost. Even without the use of advanced technology - there are many great and successful leaders in history who received an incredible education by reading books. Abraham Lincoln is one remarkable example. While this is true for those with extraordinary drive, it’s still necessary to have an education system that creates environments for others to thrive.

With the state as the competent architect and subisier, and allowing a free market - this has the best of both worlds - it satisfies those who can’t afford it, while also allowing greater dynamism, diversity and innovation in the market. The only problem would be that greater fees and funding in private universities might drain the state sector - which is what, it can be argued, happens in the secondary school private sector market. The solution is not to restrict the market to make it worse, but to make the state sector more competent.

Which is the idea of the platform state.

The whole idea is how do you solve services that have some part infrastructure and some part private market economy? Much of the failure in democracies is to argue about less or more state involvement rather than involvement in what.

The state restricts the market but cannot build or architect the system - so you get the worst aspects of a market and a state.

Lack of central direction and strategy, and market forces unable to find equilbrium or innovate.

There are two parts of the economy and society: the infrastructure (the platform), and the dynamic market layer.

The infrastructure is the roads, education, housing, rules

The Platform State is the idea that government’s core job is building and managing the infrastructure layer - housing, energy, transport, universities - competently enough so the dynamic layer of the economy (business, family life, innovation) can thrive on top of it.

The argument is not about bigger state or a smaller one, but a state that’s good at the specific job of building the substrate.

Where it fails, prove the point by building parallel institutions in pilot areas (free zones) that outperform the incumbents on measurable delivery - and let them earn replacement rather than decree it.

The end of the left-right axis. The start of the platform state.

What is the infrastructure layer?

• Basic level of housing

• Roads

• Railway

• Decision-making mechanisms

• Energy and the grid

• Legal

• Water & sanitation

• Digital and telecoms infrastructure

• Immigration

• The currency and payments system / central bank

• Data system

• The legal system

• Education

• Healthcare

• Defense and national security

• Media is part of the infrastructure and dynamic layer - the sharing of data and education is infrastructure. The critical analysis is part of the dynamic layer.

• Skills & talent development

What is the dynamic layer? That the state shouldn’t do

• Everything else

• Picking based on values rather than on metrics

theplatformstate.com

China sees the world differently and maps in China place China at the center of the world. Different maps serve different goals.

None of them are perfect, they all have trade-offs, but the question is - is it useful? We accept these trade-offs in maps. The real world is complex and a simple model helps us to operate quickly some serve our goals better than others. The mistake is to forget that.

It’s not just maps where we see these simplifications - the entire field of economics is a set of maps and mental models with simplifications and trade-offs. Think it’s hard to map the world onto a flat piece of paper? It’s even more impossible to perfectly model the complicated nature of our economy onto a simple chart. We accept these simplifications and trade-offs so we can make quicker decisions and operate in a complex world. It makes everything easier. It is a mistake to forget that. It’s also a mistake to forget that sometimes the fundamental nature of the world and our economy changes, and our models become outdated. Like maps of the world, our economic maps and models are chosen largely to serve political goals, and have trade-offs and inaccuracies.

We are undergoing a economic transition right now as we move to a more digitised economy. I will introduce the ways our current model of the economy is inaccurate and increasingly outdated and some mental models to resolve this contradiction.

In Brief

The current tension in brief is that:

There are three core incentives that we have

1. GDP growth as a measure of economic growth

2. To minimise government debt to GDP

3. To minimise or cap the ability of the state

This has resulted in largely mortgage and asset led economic growth which we mistake for real growth, while at the same time having negative effects on raising costs and reducing productivity in the economy .

The solution is that we need to have a new map:

1. GDP growth is not an accurate measure of economic growth - we should consider a balance sheet including the future.

2. That all debt in the economy should be considered as one number.

3. The state should not be either bigger or smaller but act more like a platform building and maintaining the infrastructure for the dynamic market layer to function.

4. All growth is not good growth - we need to attract and direct the economy into productive areas and away from extractive areas. Away from property, into efficient equities, start-ups, education, healthcare innovation.
   

1) The Limits of GDP Led Growth

GDP is seen as the core measure of how fast our economy is growing but it has an increasing number of critics. It was never meant to be a target, but a measure. When we start measuring and seeking to optimise the number it changes how we act and our policies change. Goodhart’s law states that when a measure becomes a target, it ceases to be a good measure. GDP incentivises borrowing - taking money from the future and using it now, and it doesn’t account for any value in the future - it’s a backward looking number. Saving? Not good for GDP. It doesn’t differentiate between good and bad growth - just activity. Years of education? Culture? Your actual strength? It optimises for maximising the return on current capital or institutions.

2) Limiting Government Debt

Government debt is seen as undesirable and many countries have fiscal rules to limit it. But private debt in the form of mortgages is seen as different. When a government defaults, it can trigger a currency crisis, freeze the state's ability to function, and take down the banking system that holds its bonds. But when a mortgage defaults, they can just take the house and sell it.

Because in a credit-based economy, new lending creates new money and spending, so debt growth tends to drive GDP growth - more credit means more transactions, more activity, a higher number. This mismatch between government debt being limited and seen as undesirable and mortgage growth being seen as more benign has resulted in a rapid increase in mortgage debt.

What the growth figures don’t capture is that credit flowing into a fixed asset like land doesn’t expand output - it just bids up the price. And rising asset prices act as a drag: they divert household income into mortgages and rent, and they pull capital away from productive investment and toward speculation on land. The economy looks like it’s growing, but it’s inflating, not producing.

• Higher housing costs divert income into servicing mortgages and rent - money that goes to existing asset-holders and lenders rather than into productive spending or investment.

• Capital that could have funded productive investment (businesses, R&D, capacity) instead chases land, because land appreciation is the easier return.

• High house prices reduce labour mobility (people can't move to where the productive jobs are), lowering aggregate productivity.

3) Limiting the Power of the State

Another unusual thing that has happened in western democracies is that as state has been getting bigger in terms of spending its productive capacity and willingness to invest and build shrank.

In the 1970s there was stagflation as the economy become slower from a large post-war state. The result was to turn to the free market.

There was Milton Friedman's monetarism and the broader free-market revival. Reagan and Thatcher are downstream of this: the old model broke, and they offered the replacement.

Thatcher sold off , and a similar thing happened in US.

The ideological enemy was a state-planned economy - the Soviet Union. This gave "more state = the road to tyranny/inefficiency" enormous rhetorical and emotional force.

But the correction overshot. It didn’t just make the state smaller - it made it unable to decide or build. The state was loaded with veto points: layers of process, consultation, legal challenge, and permitting that let almost anyone block an action, while no one retained the power to drive one. The result is a state that is strong at saying no and weak at saying yes - able to obstruct, unable to build. That’s why, when housing and infrastructure were needed, the state couldn’t provide them itself, and private credit rushed in to fill the gap.

The Solutions

The solution is to basically counter each of the above issues, but when we dig into each of these issues, we realise that there are other interconnected issues.

If we want to fix the property markets, for example, we need to create other attractive investments and liberalise and incentivise capital markets, and do it slowly to protect pensions.

Rising Above GDP Growth - a Vision and Indicators

GDP growth is not an accurate measure of economic growth - we should consider a balance sheet including the future, but not even to really consider it as more than one indicator among many. A state should set a vision that is powerful and then has a set of indicators. The indicators that matter would change depending on the goal, for example, the amount of savings or net wealth each person would have is a good goal for individuals and therefore the country to have because it gives people security and options but it directly competes with GDP which incentivises consumer spending and debt.

The reason that they don’t is that many leaders are limited by how long they are in power. It is not natural to think longer than 4 years when the average leader is less than that. Undertaking the big meaningful changes that are long term in nature might never be attempted.

Attract the Most Talented

Some options are to increase pay for those in power to attract more talented people that are in line with the private sector - a more competitive , and longer terms. This model could be learnt from singapore.

Improving Media & Education

At the same time to increase the quality of debate and education so people understand the issues better. Scial media is having the negative impact of creating echo chambers and tribalism, and competes for attention away from media outlets. The incentives of modern media 0 attention monetisation, algorithmic optimisation for engagement, continuous volume - reward alarm and outrage in a way that's historically distinctive, whatever the baseline was. which turns things into a short term tug of war and popularity contest rather than collectively working together to go in the best direction.

A solution to this could be better discussion groups and podcasts about the core issues that is a mixture of podcasts and house of commons - for example getting multiple people in the room together to discuss.

Reducing Mortgage Debt

If we were to look at the economy away from GDP we could see that mortgage debt causes assets to rise which decreases the ability for young people to buy houses. It’s actually undesirable to have more expenses houses - cheaper, abundant houses would be more desirable.

Imagine if was as easy to get a startup loan as it was a mortgage. Startups employ others, and create activity, experiments, innovation and learning and are far more desirable than increasing property prices.

Experimental Zones

One thing I’ve learnt from China, UAE, and technology companies is the value of micro experiments. China will often test new policies in certain zones to see the effect before rolling it out to the rest of the country. This is smart as a way to accelerate learning. If multiple people have different solutions, why not try them out? Those that like certain policies can even move to those zones. Which brings me onto the resolution of the power of the state.

The Platform State

The platform state is the idea that it’s not about the state being bigger or smaller, but about what it does and doesn’t do. It’s role is to be a platform for the economy to flourish on top of it. Like the garden - creating the environment and infrastructure for the flowers - businesses, families, people to flourish.

The state should create the infrastructure and regulations and guide the market.

When we look at much of the increase prices in the economy has been because the state has not adequately set up the conditions for that to thrive - it’s a platform failure.

Infrastructure is anything needed for society to function. By that definition healthcare, education, roads, transport, energy and housing are all forms of infrastructure. Failure in those areas or the prices increasing are a result of the state not performing its role. It doesn’t adequately provide the infrastructure, and limits the ability of the private sector to provide it.

Directing the Economy

All growth is not good growth - we need to attract and direct the economy into productive areas and away from extractive areas. Away from property, into efficient equities, start-ups, education, healthcare innovation. This is entirely a platform state idea - for the platform state to provide it or to enable the free market to provide it and not limit the ability.

The Limits of The Mortgage-Growth Economy

Governments want growth but also want to cut spending - so they lean on cheap credit instead of investment in infrastructure. Cheap credit flows into land and housing, because that's what banks lend against. The result is real GDP growth that's largely mortgage- and asset-price-led rather than productivity-led. That kind of growth is extractive, not generative: it inflates the price of a fixed asset, transfers wealth to incumbents, crowds out productive investment, and loads the economy with debt and fragility. We've been mistaking asset inflation for prosperity.

The New Low Cost Productive Abundant Economy

A new abundant economy is one where price of the essential needs fall, while the overall economy grows, and people become better off. There is abundant low cost housing, and infrastructure, high quality education and healthcare. That frees up people and capital to flow into innovation and startups thrive. This gives that economy a major global competitive advantage of being well-run. This is the ultimate economic advantage. The ability to outproduce, outcompete others.

Why not?

The reason it hasn't happened isn't that no one thought of it; it's that the incumbents benefiting from the current arrangement are exactly the ones with the power to block the change. Retirees benefit from having a house that increases with inflation, so does much of the economy from the current set up.

Also between here and there is not an easy road, it takes time and would likely have economic challenges as the economy shifts. It would need to take 5-10 years to restructure an economy like this.

An economy with low infrastructure costs would have a massive competitive advantage over others, but that advantage is long term and compounding, while the benefits of the existing arrangement are immediate.

A big spender with more debt may have actually have an advantage before the debt becomes due. The question is whether that’s being spent on the right things.

Questions

Spending on housing, healthcare, education is the economy - so if it falls, won’t the economy hollow out and shrink?

Part of why it feels like the economy would shrink is that GDP counts the waste as output. Overpriced rent, bloated healthcare admin, credential inflation — these all show up as GDP right now. So if you strip out the extraction, measured GDP might even fall in those categories, and by the GDP map it would look like loss.

But that's precisely the map being wrong - you'd be removing activity that was extractive, not generative. The economy would be better off (people richer in real terms, more productive investment) while the number that miscounts waste as value might not reflect it.

Money spent on inflated rent or an overpriced degree isn't creating value equal to its price - a large chunk of it is transfer (going to a landowner, an incumbent) and deadweight (pure waste from the distortion). When that spending falls, that value doesn't vanish from the economy. It gets released to go somewhere else.

The economy becomes made of whatever people actually want once they're not forced to overpay for the basics - which historically is: more innovation, more services, more culture, more leisure, more new business formation, higher-quality versions of everything.

It also attracts talent, companies to be based there.

We just don’t realise it yet.

On paper it still looks like growth - 0.2% this year, 3% in some countries.

But our population is shrinking.

Those are two ends of the same candle: an economy can’t honestly call itself growing while there are fewer people every year to grow for.

Here’s the part the GDP figure misses.

Each year a greater share of that “growth” is just the same life getting more expensive - energy and housing eating a larger slice, not because we’re getting more, but because the basics cost more to stand still.

That’s dead money.

If a pound isn’t creating something new, then growth is just measuring the rising cost of what we already had.

And a lot of what we count as new activity is old activity finally getting a price tag.

Dating apps charge for what courtship did for free.

Single-earner households become dual-earner households that hire a nanny to cover the gap. The work was always happening- now it runs through the market, so now it counts.

That’s the economy doing exactly what it’s designed to do: turn every possible exchange into something monetisable, measurable, taxable, investible.

It looks like growth.

But are we actually any better off?

That’s the flaw in the model. It measures transactions, not future growth - and the two have quietly stopped moving together.

But it was never meant to.

What comes next

Systems overcorrect.

They zig too far one way, then zag too far back.

It’s a global competition, and whoever optimises hardest for the wrong thing eventually gets beaten by whoever didn’t.

That’s part of why the global south is catching up.

Optimise purely for economic output and your population shrinks; the country that kept some slack gains ground.

Everything reverts to the mean in the end.

So this probably resolves itself - competition and evolution will force the correction whether we plan it or not.

The shame is the wasted time.

We could start now: better metrics that count wellbeing and not just throughput, more digital governance, and an all-out push for abundant housing and energy so the basics stop swallowing our growth.

Fix the basics, and growth can go back to meaning what we thought it meant.

When you look at - what students are evaluating, choosing and paying for, and what universities are promoting, selling, and providing - education is rarely the major part - it is one part of a bundle.

And education is commoditising.

University is a bundle between:

• Credential

• Tourism and

• Immigration

• Community

• Education

• Real estate

Every student is choosing a unique combination - a bundle.

And there is a difference between what they say they are buying and what they are actually buying - we don’t openly discuss it this way.

And the nature of the market is changing.

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For short term or summer students, they are buying some combination such as: 30% tourism, 10% housing, 10% visa / immigration, and 10% credential, 10% community and 20% education.

For bachelor’s students, they might be buying 0% tourism, 0% immigration, 40% credential, 20% community, and 40% education.

Some international students they may be 0% tourism, 10% housing, 40% immigration, 10% credential, 20% community, and 20% education, but another, perhaps from a wealthier country, may be 25% tourism, 0% immigration, 0% housing, 25% credential, 25% community, and 25% education.

This matters for universities, when they are positioning their products, and also when we discuss the purpose of universities, because each market and each student is quite different.

It also matters because a great deal of the power of universities is the fact that they are bundled together. They’re like a meal in a restaurant. You pay for the location, the environment, a space for community, and the food together.

Now we’ve deconstructed the value of universities, we can better understand their value, and reconstruct around them.

The interesting thing is that the value of education is commoditising - people can learn more and more with AI or on YouTube. But verified learning is still valuable (which is the credential), which competes with proof of work and other sources of verification.

Immigration is policy-dependent and volatile and the one universities have least or even no control over.

They are becoming more important as centers of community.

The components have wildly different margins and disruption curves, so the bundle is a cross-subsidy.

Sometimes the components work well together. Elite universities are highly synergistic.

Sometimes the components compete with each other, and make the bundle more expensive - low ranked universities and many programs the bundle do not complement each other, and is not optimum.

• Education wants to be cheap, and expand to help the greatest number.

• Community wants to be physical, local, synchronous, scarce.

• Credential wants to be trusted, narrow, verifiable.
  These have been forced into one four-year campus product because historically you couldn’t separate them. You now can.

There are new opportunities in community + credential + education without the campus, or with temporary campuses.

It would be interesting to see more innovations in the 3-4 year bachelor’s degree model.

Such as 1 year residential + work + lifelong community memberships.

Now that we have the internet, we can learn and connect from anywhere, the only reason we continue the 3-4 bachelor’s degree is because that’s how it’s always been. For specific hard subjects such as science, but for more practical programs, such as software, or business, more and more learning can be done whilst working.

Every few years, Britain has the same argument again. Should university be free, like the NHS, because an educated population is a public good the state has an interest in producing?

Or should it be priced, like any other service, because the main beneficiary of a degree is the graduate who earns more because of it?

Tuition fees go up. A cap gets debated. Someone proposes a graduate tax. The argument circles back to where it started, because nobody ever agrees on the premise underneath it: that a university is a good - something an individual consumes, which the state either subsidises or doesn’t.

I think that premise is wrong.

A university isn’t a good. It’s infrastructure. And once you see it that way, the entire debate about who should pay for it starts to look like the wrong question.

Nobody debates whether to fund the grid

We don’t ask whether the electricity grid should be a public or private good, because a grid isn’t something an individual consumes and then owns the benefit of. It’s the precondition for everything else to function. You can debate who operates the grid — state utility, regulated private monopoly, some hybrid - but you don’t debate whether the grid should exist, or ration it by ability to pay, because the cost of not having reliable electricity is borne by the whole economy, not just the household that goes without.

Treat a university system the same way and the funding question changes shape. The relevant output of a university isn’t “degrees for individuals.” It’s capacity - research capacity, talent-formation capacity, the physical and institutional link between a lab and the industry next door that lets a discovery become a product without a decade of friction in between.

That capacity is what an economy runs on the same way it runs on power and transport. Once you’re arguing about capacity rather than consumption, “should this be free or priced for the individual” stops being the central question, because the individual student was never the primary unit of account. The country was.

China never had this argument, and I don’t think it’s because the debate got won by one side. I think it’s because the premise was never accepted in the first place. University R&D capacity there was treated as something the state needed built, at scale, on a timeline the market alone wouldn’t produce - the same logic you’d apply to a rail network or a semiconductor fab.

And you can see the downstream effect physically, not just in policy language: research labs sitting inside industrial parks, professors running commercial ventures without institutional suspicion, campuses positioned next to the exact companies their graduates and their research feed. The infrastructure framing isn’t a metaphor for how China talks about universities. It’s a description of where they were built.

The obvious objection - and why it doesn’t quite land

The strongest case against this reframe is: infrastructure implies central direction, and research is precisely the domain where central direction historically performs badly.

Nobody can decide in advance which lab produces the breakthrough. That unpredictability is the whole argument for distributed, uncoordinated, occasionally wasteful-looking pluralism over any system where a planner declares in advance what matters. Roads are infrastructure because every driver needs the same road. Research isn’t like that, and treating it as if it were risks trading genuine discovery for prestige projects that look good in a five-year plan.

But this objects to the wrong thing.

“Infrastructure” doesn’t have to mean the state picks the research topics or the winning company. It can mean the capacity is guaranteed - the labs, the funding continuity, the administrative and physical proximity to industry - while what happens inside that capacity stays genuinely competitive.

China isn’t running one national AI lab and declaring it the winner. It’s guaranteeing that dozens of labs, sitting close enough to commercial capital and commercial problems, can compete fast, because none of them has to spend two years negotiating for the right to exist. Guaranteeing the plumbing is a different claim from picking the outcome, and it’s the one actually worth making.

It’s also fair to name what this framing costs, because a system that guarantees capacity regardless of market signal can overbuild - empty science parks, prestige labs producing output nobody wanted, capacity justified by political optics rather than genuine need. That risk is real and I’m not going to pretend the trade-off doesn’t exist. But the alternative has its own failure mode, and Britain is currently living inside a clean example of it.

What “priced good” actually costs, in practice

In 2023, the UK government commissioned an independent review into why university spinout companies - the exact handoff point where research becomes a company - were struggling to raise investment and get off the ground.

What it found was a negotiation problem baked into the funding logic. Because universities are cash-constrained institutions that have to behave commercially to survive, their tech transfer offices were negotiating equity stakes in spinouts as a counterparty, not a collaborator - and negotiating hard.

The average opening equity offer from a university was around a third of the company. Close to a third of universities opened negotiations demanding half. Two out of three academic founders never even left their university post to run the company they’d started, in part because ownership terms were still unresolved. The review’s own conclusion was blunt: the process took too long, and deal negotiation was a primary reason why.

That’s the cost of treating the university as a good rather than infrastructure, made concrete.

When the institution has to fund itself by extracting value from the very company it helped create, every spinout becomes a negotiation before it becomes a business. Compare that to a system where the lab doesn’t need the equity, because its existence was never contingent on winning that negotiation in the first place - where the professor and the company next door are already collaborators because the funding question was answered upstream, once, at the level of the whole system, instead of being re-litigated at every single handoff.

The UK review has since pushed universities toward smaller stakes, and it’s working - average equity has come down.

That’s an improvement.

But it took a Treasury-commissioned intervention to talk institutions into taking less of something they were never meant to be extracting from in the first place. That’s what happens when the underlying category is wrong: you spend policy effort correcting symptoms of a framing problem, one review at a time, instead of asking whether the framing was the mistake.

The actual question

I’m not arguing China’s version is free of cost, or that Britain should copy it wholesale - a system that answers the funding question once, centrally, gives something up in return: arm’s-length distance from state direction, a founder’s fuller claim on their own company, the friction that sometimes protects academic work from being pulled too early into commercial urgency. Those are real and worth keeping.

But I don’t think “public good or private good” is the axis worth arguing on anymore. The more honest question is whether you’re building capacity or selling a product - because everything downstream of that answer, the negotiations, the timelines, the distance between a discovery and the moment it ships, follows from which one you picked.

Britain keeps having the old argument. It might be worth having a different one.

This is a part of a series on the Platform State.

Thatcher set out to get Britain growing.

Her solution to the bloated post-war state was to shrink it and sell it off - move it to the private sector.

The thinking was government is inherently inefficient, and the private sector, disciplined by market forces, is not.

In the short term, it looked like it was working.

The sales raised money, grew investor wealth, and reduced public debt.

And in some cases it did work - where privatisation created real competition - telecoms, airlines like British Airways. BT was in competition with rivals and prices fell.

But it was too much.

Those market reforms led to the situation Britain is in today. Blindly following those old principles when they no longer work.

Privatisation only works when there is competition to do the disciplining.

A water company, a railway, a national grid - these are natural monopolies.

There is one set of pipes, one set of tracks. Selling them doesn’t create competition; it just transfers a public monopoly to a private one.

The answer to an inefficient state was never to sell off its monopolies. It was to make the state itself run them better.

The promise was that the people would become the shareholders - popular capitalism. But That is not what happened.

The shares have concentrated in big finance - BlackRock, the index funds- and increasingly overseas owners.

Public monopolies became worse - private ones, and public debt shifted to private debt, larger than before.

Things looked great, there was a stock boom in the short term.

But it left behind an extractive layer, pushing up prices and the cost of living.

Becuase if GDP is the measure of success, it still has to find some way to grow the economy.

Rising energy prices, rising levels of profit for energy companies is what it was designed to do.

The government debt didn’t disappear; it moved.

Off the public books and onto private ones, in the form of mortgages.

The state stopped borrowing to invest and let households borrow instead.

And we built our growth on a rising tide of house prices.

But Housing was never truly privatised.

It was semi-privatised - on paper, you own it (with the bank), but the state kept every lever: planning permission, interest rates, the supply of land.

And that scarcity is what made it grow.

It did benefit the first homeowners, like an MLM.

They could then use money from their first house price going up to buy more.

But then the merry go round stopped.

Housing can only go up so much, until the mortgage debt becomes extractive.

Until first time buyers can no longer afford to live near to work.

So what’s the solution?

To take back control of what should be run by the state - and we’ve got plenty of examples of competent states now that can get stuff done - that Thatcher didn’t have - Singapore, China, UAE, Norway, Switzerland.

But we also forgot that the British state was capable of building, and was one of the most effecitive and well-run states that ever existed (fiscal-military, Victorian infrastructure, 1940s reconstruction), financial capacity - that even exceeds that of the Roman empire.

That capacity has been deliberately hollowed out since roughly 1979 - because of Thatcher’s thinking - through privatisation, outsourcing, the loss of in-house engineering and planning skill, and the cultural assumption that the state is inherently inefficient.

We should make growth about real growth.

To make government efficient - not bigger, but more effective, and the private sector to be free to do what it does best.

That’s because they’re diagnosing the wrong disease.

If birth rates are falling everywhere globally - even in countries with vastly different policies, it can’t be policy related it must be something that is common across all cultures.

That something is the economic consumption model itself - and we may be watching it eat its own tail.

We Built an Economy That Consumes Its Own Future

Modern economics runs on a simple engine: produce things, sell them to consumers, grow. But there’s a flaw baked into this model that has been compounding quietly for fifty years.

Consumption growth requires one of two things: either consumers have more money to spend, or you find ways to extract more from the money they already have. For most of the late twentieth century, rising wages handled the first. When wages stagnated, the economy switched to the second - financialisation, credit expansion, asset inflation, the relentless expansion of costs in housing, education, and healthcare.

The result is that the average person in a developed economy is spending a larger share of their income on the basics of existence than any previous generation. Housing. Debt repayment. Education loans. The essentials have been quietly repriced upward while wages have not kept pace.

This is not a policy failure. It is the logical endpoint of a growth model that treats consumer spending as the engine while treating consumers themselves as the fuel.

And children are the most expensive consumer decision a person can make.

The Consumer Surplus Problem

Consumer surplus is the gap between what something is worth to you and what you actually pay for it. It is, in a real sense, the breathing room of economic life - the margin that makes you feel like the economy is working for you rather than simply extracting from you.

Consumption-driven growth has been systematically eroding that surplus for decades. Every time housing costs rise faster than wages, consumer surplus shrinks. Every time a subscription replaces a one-off purchase, surplus shrinks. Every time a credential that used to cost two years now costs five, surplus shrinks.

When surplus collapses, people make different calculations. They delay. They reduce. They optimise. Having children is the opposite of optimising - it is the most gloriously inefficient, surplus-destroying decision a human being can make. It makes no economic sense whatsoever.

So in an economy that has trained people to think like consumers first and has simultaneously stripped away their financial slack, fewer people make that decision. Not because they don’t want children. But because the felt conditions for it- the sense that there is enough, that the future is expansive rather than constrained -have been steadily consumed by the model itself.

GDP Doesn’t Measure What’s Being Lost

Here’s the trap that makes this so hard to escape: the consumption model keeps producing GDP growth even as it destroys the conditions for human flourishing.

Rising house prices add to wealth figures. Growing debt adds to financial sector output. The expansion of paid services to replace things families and communities once did for free - childcare, elderly care, cooking, cleaning — all of this registers as growth.

But what’s actually happening is a substitution. Things that were once produced within households and communities, outside the market, are being pulled into the market and monetised. GDP goes up. Consumer surplus goes down. The household balance sheet gets thinner. And the decision to have children - which requires exactly the kind of slack, security, and felt abundance that the model has been quietly consuming - becomes harder to make.

We are not suffering from a birth rate problem. We are suffering from a consumer surplus problem that is expressing itself as a birth rate problem.

The Housing Trap

Nothing illustrates this more concretely than housing. In previous generations, the path was legible: get a job, rent cheaply, save, buy, settle, start a family. That sequence has broken down almost everywhere that consumption-led growth has fully taken hold.

Housing has been transformed from shelter into an asset class. When that happens, rising prices are no longer a problem to solve - they are a feature of the model. They generate wealth for existing owners, collateral for banks, and returns for investors. So nobody with power fixes it, because for them, it isn’t broken.

But for the person in their late twenties trying to save a deposit while paying rent that consumes 40% of their income, it is very broken indeed. The years being consumed by that trap are precisely the years biology intended for family formation. And the cruelest part is that it’s not felt as a political failure - it’s felt as a personal one. As if you simply haven’t worked hard enough yet to deserve the life your parents had at your age.

A home also isn’t just shelter psychologically. It is the felt precondition for permanence. For rootedness. You don’t plant a family in soil you might be evicted from in six months. Housing insecurity creates a specific, low-level existential anxiety about the future - and people don’t make 20-year bets on a future that feels that fragile.

The GDP Trap

The housing trap is a symptom of the wider GDP that trap runs deeper still, because it is a problem of measurement - and therefore of values.

GDP counts what is transacted. It does not count what is lost. It does not count the hours a parent spends raising a child, the care a family member provides to an elderly relative, the social fabric woven by communities that stay in one place long enough to know each other. None of that registers. It is economically invisible.

What GDP does count is when those things get replaced by paid services. When the family that used to raise children together fractures under labour market pressure and childcare gets outsourced, GDP goes up. When elderly care moves from family to facility, GDP goes up. The market has expanded. The national accounts look healthier. And something irreplaceable has been quietly consumed.

This creates a political trap that is almost impossible to escape. Every intervention that makes family life more viable - genuinely affordable housing, wages that track productivity, reduced working hours - looks like a cost to the model. Every intervention that extracts more from consumers while substituting market services for household ones looks like growth. So governments keep choosing growth, and the birth rate keeps telling them what that choice actually costs.

The Next Step

Every growth model has a natural limit. The consumption model’s limit is the consumer.

We currently have these contradictions in our economic model and have reached the limit.

When you extract enough from wages through housing costs, debt, inflation in essential services and credential requirements, you eventually reach a point where the consumer cannot consume their way to the life the model promises. The house, the family, the comfortable retirement - these were the implicit contract. The economy would grow, and in return, ordinary life would be affordable and expansive.

That contract is breaking down. And the birth rate is one of the most honest signals we have that it’s breaking down - because the decision to have a child is ultimately a bet on the future. It says: I believe there will be enough. I believe the world my child enters will be navigable.

Fewer people are making that bet. Not because they’ve become selfish or individualistic or obsessed with travel and avocados, as the commentary class likes to suggest.

But because the model has consumed enough of their surplus that the future no longer feels like a safe place to invest in.

Until we build an economic model that genuinely returns surplus to people - through affordable housing, reduced credential inflation, wages that actually track productivity - the birth rate will keep telling us the same thing.

The engine is eating itself. And the falling birth rate is the warning light.

But the thing is, the current model is kind of working, we’re growing, and so it will take either a crisis, or a competitor with a better model, to replace the current one. When everyone is taking massive loans and in debt, a new better more prudent model can’t compete.

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Here’s an article which explores the concepts in more detail with practical examples.

For nearly a century, political imagination has been trapped in a, binary choice: the left-wing model of a heavy-handed, protective state, or the right-wing model of an unbridled, laissez-faire market.

But as we confront the massive logistical, ecological, and economic demands of the mid-21st century, this old axis is breaking down.

A new paradigm is emerging, one that resolves these contradictions into a powerful synthesis: New State Capitalism.

This is is a model where an incredibly efficient, high-performing state constructs the foundational “operating system” of society, enabling a hyper-dynamic private sector to flourish on top of it.

Like how a gardener organises the gardens, provides the nutrients, space, and organisation so a beautiful garden can flourish.

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The State as the Base Layer: Massive Construction and Abundant Housing

The core tenets of the old right - that the state is inherently incompetent and that the market should dictate all infrastructure - have been thoroughly debunked by the realities of modern development. Particularly - China.

When left entirely to the private sector, critical infrastructure becomes fragmented, underfunded, and optimized for short-term dividends rather than long-term resilience.

New State Capitalism treats infrastructure as a national competitive advantage.

The state steps in as the ultimate developer, executing massive construction projects with corporate-level efficiency and technocratic precision.

• Energy and Transit: The state builds and operates the core utilities - next-generation nuclear power plants, robust smart grids, and high-speed rail networks. These aren’t run as sluggish bureaucracies, but as lean, high-performing engines designed to lower the baseline cost of doing business.

• Abundant Housing: Rather than leaving housing to speculative real estate markets that choke cities with artificial scarcity, the state treats shelter as a critical infrastructure project. Through massive, industrialized construction initiatives, the government ensures a permanent abundance of housing. By flooding the market with supply, the state structurally drives down the cost of living.

Universal Basic Income: Venture Capital for the Masses

Universal Basic Income (UBI) isn’t a leftist welfare program, it’s instead an essential macroeconomic stabilizer and an entrepreneurial catalyst.

When the state ensures a baseline financial floor alongside abundant, cheap housing, (and let’s be honest, housing is the majority of the cost - that also drives inflation in the economy)

The entire psychology of the workforce changes.

UBI removes the existential dread of starvation and homelessness. Instead of trapping citizens in a safety net, it provides them with a springboard.

The Entrepreneurial Floor: UBI acts as a form of state-sponsored venture capital for every citizen. When the cost of failure is no longer destitution, people are suddenly free to take massive creative and entrepreneurial risks. They can quit dead-end jobs, learn new skills, invent new technologies, and start businesses.

The Symbiosis: Why Entrepreneurs Flourish Under Efficient Government

The greatest irony of the old ideological debate is that the free market actually works better when supported by a strong, efficient state.

Under New State Capitalism, the public and private layers do not compete; they complement each other perfectly.

Entrepreneurs and private enterprises flourish precisely because the government is exceptionally well-run:

• Eliminating Cost Frictions: Business owners don’t have to subsidize hyper-inflated employee salaries just so their workers can afford rent in broken housing markets. They don’t have to worry about blackouts, crumbling roads, or failing transit links.

• A Healthy, Agile Workforce: With housing guaranteed and a UBI floor in place, businesses have access to a workforce that is healthier, less stressed, and more willing to engage in high-upside, innovative work.

• Clear Rules, Fast Execution: An efficient state eliminates bureaucratic red tape. Regulatory frameworks for new technologies (like AI, biotech, and robotics) are clear, fast, and predictable, allowing private companies to scale at unprecedented speeds.

Examples:

Post-WWII France (Dirigisme) - The Energy & Transit Platform

• The Action: The democratic government stepped in as the ultimate developer, taking on the massive, long-term capital costs of building the nation’s core utilities-specifically constructing a world-class nuclear energy grid (EDF) and the high-speed TGV rail network (SNCF).

• How It Happened: The state ran these networks like lean corporate engines rather than sluggish bureaucracies. By absorbing the crushing infrastructure costs, the government radically lowered the baseline cost of doing business, which sparked a massive boom in private manufacturing, technology, and commerce.

Vienna, Austria - The Abundant Housing Platform

• The Action: For over a century, the city government treated shelter strictly as critical infrastructure, continually buying up land reserves and ensuring that 60% of Vienna’s population lives in municipal or state-subsidized housing.

• How It Happened: By permanently flooding the market with government-backed supply, the state structurally suppressed rent prices city-wide. Private enterprises flourished because they didn’t have to pay hyper-inflated salaries just to help workers survive, making the local economy fiercely competitive.

The Nordic Nations - The Entrepreneurial Floor Platform

• The Action: Countries like Sweden, Denmark, and Norway built comprehensive universal safety nets—including free higher education, universal healthcare, and aggressive retraining programs—to provide a permanent baseline of human security.

• How It Happened: This security net effectively functions as state-sponsored venture capital. By removing the existential dread of starvation or homelessness, the state dramatically increased citizen risk tolerance. Because the cost of business failure is a return to comfort rather than destitution, places like Sweden became global leaders in tech unicorns per capita (e.g., Spotify, Klarna).

Taiwan - The Tech Infrastructure Platform

• The Action: Taiwan realized that advanced semiconductor manufacturing was a critical national advantage, prompting the government to directly fund, incubate, and build the initial infrastructure for what became TSMC.

• How It Happened: The state absorbed the staggering, multi-billion-dollar financial risks of pioneering the microchip hardware foundation. Once that “operating system” was securely established by the government, a hyper-dynamic private ecosystem of software, hardware, and global logistics companies rapidly scaled on top of it.

Conclusion: The High-Performance Future

The left-right debate was born in an era of scarcity and industrial friction. New State Capitalism is designed for an era where state efficiency can unlock radical abundance.

By taking responsibility for the massive, high-risk undertakings - building power plants, laying rail lines, constructing abundant housing, and guaranteeing a financial baseline through UBI - the state removes the heavy burdens that crush private initiative.

The future does not belong to the state that taxes its markets into submission, nor to the state that abandons its citizens to the whims of an volatile global economy.

The future belongs to the platform state: a lean, efficient powerhouse that builds the foundation so its people can build the future.

This is connected to the idea of emergence:

We live in an era where our economic success is increasingly disconnected from reality.

Gross Domestic Product (GDP) skyrockets, stock markets boom.

Yet, birth rates plummet, families struggle with unaffordable housing, the deficit keeps rising uncontrollably each year.

This is our economic contradiction.

Why is everything getting better, technology booming, but these indicators demonstrate otherwise? Shouldn’t our deficit be falling and birth rates growing?

At the heart of it is a bug in our economics - it’s suicidal economics - a system that grows by liquidating long-term human flourishing.

The importance of incentives

I’ll start and finish with the importance of incentives as Charlie Munger mentioned, and then introduce the solution by coming back to Warren Buffet.

Show me the incentive and I'll show you the outcome. Charlie Munger

In this article I’m going to explain the history of various forms of economic incentives over time and GDP and how it came about.

The Spanish Empire Plundering Gold

In 1790 Spain was the largest power in the world, it benefited from accumulating huge amounts of gold and silver.

But the problem is, when the resources stopped, there was nothing to fall back on, it failed to develop local industry - it didn’t need to. It was overtaken by the next power with a better philosophy.

The British Empire Industrialised

The British saw it differently - national wealth comes from a nation's productive capacity - not by the amount of resources it could accumulate but by how much it could create. The wealth of nations was written in 1776. Britain became the workshop of the world

The First Industrialist's Dilemma - Britain failed to pivot away from declining heavy, export-oriented industries (coal, shipbuilding, iron, textiles) and US, Germany had natural advantages in industry and resources and overtook and didn’t need to maintain global expensive sea routes. The railroad was more efficient than the sea empire. Britain was burdened by a large empire and failed to move toward emerging consumer-oriented sectors, resulting in mass industrial over-capacity, obsolete techniques, and high unemployment

The US Consumer Economy

In 1934, in the aftermath of the great depression, the US adopted a new philosophy - GDP. An economy was measured by the volume of activity and transactions in the economy. Consumerism was born, and then, the welfare state.

Every 100 or so years we have a fundamental shift in how things work and now we are coming to an end to the consumer period and need a new economic model. The industrial era economics that are focused on the consumer economy no longer work.

We now have the internet and that means a completely different system. In 2026, this philosophy is now gutting out local industry, and fail to differentiate between good and bad transactions.

The Problem with GDP

“GDP measures everything, in short, except that which makes life worthwhile.” - Robert F. Kennedy

GDP was designed to measure how fast the economy is moving and how many transactions are happening. It is exactly like the speedometer on a car. It doesn’t measure how strong the economy is and how much it is actually growing, just how fast it is currently moving.

This is a great measure when the economy is operating at 10 - 70mph, but when it reaches the outer limits, it becomes damaging to the engine. It incentivises taking on more debt, to go faster and to keep going at any speed. It’s a good measure in principle, but when it’s the overriding pricniple, it becomes damaging.

In order to upgrade the economy, we need to look at and actually upgrade the car engine.

The Rear-View Mirror Trap

Beyond the speed analogy, the fatal flaw of GDP is that it is fundamentally backward-looking. It measures the “smoke” of yesterday’s fire but tells you nothing about the fuel left for tomorrow.

Because GDP only registers a “success” when money changes hands now, it creates a perverse incentive to liquidate the future to pay for the present. We sell off our natural resources, we over-leverage our children with debt, and we burn through the “social capital” of the family unit - all to keep the current quarter’s numbers high. It is the economic equivalent of a farmer eating his seed corn to feel full today, then wondering why he is starving when the next season arrives.

This isn't just a radical critique; it’s a realization reaching the highest levels of global thought. Joseph Stiglitz, a Nobel laureate, has long argued that GDP is a poor measure of well-being because it ignores inequality and sustainability. Similarly, the World Economic Forum and the OECD have begun developing "Beyond GDP" frameworks, acknowledging that measuring "transactions" while ignoring the depletion of natural and human capital is like a pilot flying a plane by looking only at the fuel flow and ignoring the altimeter.

GDP Eats the Family

Economies focused on maximizing GDP naturally also seek to move activity from the informal sector (home, community, unpaid care) into the formal sector (taxable transactions).

In a traditional family structure, “care” is a non-monetized consumer surplus. When a mother cares for a child, or a family cooks a meal together, no GDP is recorded. However, when the State provides childcare or a corporation delivers a meal via an app, GDP rises.

This creates a systemic incentive for the State to “eat into” the family’s role, replacing organic bonds with institutional or transactional ones.

Social psychologist refers to this shift as the ‘Great Rewiring.’ By moving childhood and community from the real-world ‘informal sector’ onto algorithmically optimized digital platforms, we have traded the mental health of an entire generation for a temporary boost in engagement metrics.

GDP acts as a master incentive on the economy. Directly - as state spending is 40% of the economy, but also through the control of policy in the parts - immigration, limiting housing, and education.

As the economy seeks new frontiers for growth, it has begun to “financialize” human relationships. The “consumer surplus” of dating and companionship is being harvested by platforms designed to maximize engagement and profit.

• Tinder and the Dating Market: What was once a community-based social process is now an algorithmically driven market. This has led to a “winner-take-all” dynamic that leaves many men feeling economically and socially devalued.

• OnlyFans and the Commodity of Attention: The monetization of intimacy (OnlyFans) and the gamification of attention (smartphones/social media) turn human connection into a series of micro-transactions.

The end goal of an economy seeking total GDP growth is a society of perfectly atomized individuals who depend entirely on the Market and the State for every need, from food to emotional validation.

The Abundance of the Digital Economy

As economist Diane Coyle, author of GDP: A Brief but Affectionate History, argues: “GDP was designed for a world of mass-produced physical goods. It is fundamentally ill-equipped to measure a digital economy where the most valuable assets—data, software, and human connection - often have a market price of zero but a societal value that is infinite.”

The conflict we have now is that the consumer economy measures transactions in terms of price, but the value is decreasingly connected to the price. Digital economics result in everything becoming cheaper over time.

This creates the very peverse incentive of governments who are seeking GDP growth to:

• Increase debt

• Create artificial scarcity to maintain the price of certain goods, and keep the economy growing.

So now I’m going to explore two examples that are dangerous and the reasons behind them.

Governments Restrict Housing to Keep the Economy Strong

There is a conflict between young people getting on the housing ladder and the economy.

Immigration is Better for the Economy

The Migration Observatory and Office of Budget Responsibility have written about how immigration is better for the economy because the country doesn’t need to cover the costs of raising the person from a baby. It boosts the GDP

https://migrationobservatory.ox.ac.uk/resources/briefings/the-impact-of-migration-on-uk-population-growth/

This demonstrates the perverse incentive that exists to limit the number of new people who are being born and import people from other countries, effectively removing the cost.

Demographic researcher , director of Birthgap, has identified that this ‘unplanned childlessness’ is a byproduct of economic shocks that force young people to delay family-building until the biological window begins to close - a cost that GDP never accounts for.

Large scale immigration also creates a self-reinforcing cycle where the competition on housing also increases costs to raise a family and limits the amount of new children that can grow. This forces a downward pressure on populations.

Companies Also Have an Incentives to Limit Population

Larry Fink CEO of Blackrock, one of the most influential figures in global finance, that owns leading stakes in many of the world’s biggest companies highlights how lower birth rates is an advantage for an economy as it requires them to develop automation and industry.

This shows how is there is an aligned incentive of companies, shareholders, and nations to restrict the population and bring in robots an AI. The more that gap, the more that is needed.

It’s essential to be mindful of that interest and how that is also driven by companies incentives to fill the gap.

The Importance of Humans

A declining birth rates is not an inevitable thing but the result of specific policies and the result of the master incentives. At no point in our GDP do we consider humans as valuable, and so we are liquidating humans.

The Economy of Completely AI

Taken to the extreme - if we have an economy that is made fully of robots and AI, it can become completely about resource extraction, energy and then selling to humans or other AI.

If robots do all the work, humans have no wages. If humans have no wages, they cannot buy what the robots produce. If no one buys what is produced, the "economy" (as measured by transactions) collapses

The Solution - the Balance Sheet

We need a reboot of what a human is for in the economy. And this also comes to the heart of what economics is about - from allocating finite resources in the face of infinite consumer needs towards creating abundance. Humans are not a consumer, but the heart of the new economy. Human capital is the core pillar of the economy.

On an Income Statement (GDP), a child is a 20-year liability. On a Balance Sheet, a child is a 60-year appreciating asset. When we change the math, we change the incentive to support families, education and healthcare.

As our economy is maturing, it’s essential to move away from thinking of the economy as a speedometer and moving towards measuring the economy as a balance sheet.

Warren Buffet: “I spend more time looking at balance sheets than I do income statements”.

Lowering house prices and building more houses would make the GDP fall but would grow birth rates and grow the balance sheet.

So, what does a National Balance Sheet actually look like? Unlike GDP, which only tracks ‘Activity,’ a Balance Sheet tracks Net Worth.

• Assets: We would list our ‘Human Capital’ (birth rates and cognitive health), our ‘Resource Equity’ (energy independence), and our ‘ Infrastructure’ (housing affordability and family stability).

• Liabilities: We track not just fiscal debt (and actually measure and incentivise managing it - because GDP completely omits it), but ‘Social Depreciation’—the rising costs of loneliness, mental health crises, and the hollowing out of our local communities.

Conclusion

If we follow Charlie Munger’s logic, our current 'Suicidal Economics' are simply the result of a bad incentive: the obsession with the GDP speedometer. To fix the outcome, we must change the incentive. By shifting our gaze from the 'Income Statement' of today to the 'Balance Sheet' of tomorrow, as Warren Buffett does, we stop liquidating our future to pay for our present. We stop being a consumer-driven engine and start being a human-driven legacy.

In the end, a civilization that optimizes for a speedometer while the gas tank is empty isn't 'growing'- it's just coasting toward a cliff in high gear

How should we navigate the current reality and prepare for and build this future

Further Reading

This thesis builds upon the work of several thinkers who are already sounding the alarm on our current economic “operating system.” For those looking to dive deeper into the “Beyond GDP” movement and the future of human capital, I highly recommend:

• on why productivity and birth rates are the true engines of a nation.

• on the “disconnect” between economic data and human reality

• on the “Financialization of Culture” (which aligns with “GDP Eats the Family” section).

• – On how technology is "liquidating" the mental health of the youth

• – On the importance of family units as the core of society.

• – On why “psychological value” matters more than “market price.”

• (Pronatalist.org) – Leading voices on the birth rate crisis

• Stephen J. Shaw (Director of Birthgap) – Documentary filmmaker on demographic collapse

• Diane Coyle - Why the economy feels broken even when its growing Podcast, and Blog.

‘Any damn fool can overtake going downhill.’ My grandfather said as a car revved past us on a country road.

Today, this describes our economy.

We have been taught that GDP growth is the ultimate scoreboard of a successful economy.

GDP is like a speedometer on a car. It is a measure of how many transactions are happening, but it doesn’t care about the direction or sustainability of the engine.

Speed is what matters.

However, if our economic transactions are happening faster, but we are not upgrading our economic engine - infrastructure, and human capital, and birth rates are falling, debt is rising, and we are burning all our fuel, then our economy isn’t getting stronger, it’s headed toward a cliff.

The Spanish Trap: 1790 vs. 2026

In the late 1700s, Spain was the world’s undisputed superpower. They had accumulated more “resources” (gold and silver) than any nation in history. They were rich beyond imagination.

But they failed to develop local industry. What’s the point? They didn’t need to; they could just buy whatever they wanted.

When the silver stopped flowing, Spain collapsed. They were overtaken by the United Kingdom - a nation with a better philosophy.

In 1776 Adam Smith wrote the Wealth of Nations. The British realized that wealth doesn’t come from accumulation, it comes from Productive Capacity. They became the “workshop of the world” because they invested in the ability of their people to produce.

The GDP Delusion

In 1934, following the great depression, the U.S. adopted a new metric: GDP. It was designed to measure activity to get the economy flowing again. It was never meant to be the target, yet over time, it has become our chief economic goal, and a “master incentive” that drives our economy.

The problem? GDP is a misguided metric. It doesn’t differentiate between Value Creation and Economic Liquidation. Our obsession with GDP distorts our economy.

• If you have a car crash, GDP goes up.

• If you have an oil spill, GDP goes up.

• If the cost of housing, healthcare, and education doubles, GDP goes up.

By chasing GDP, we have incentivized Extractive Economics. The flow of money is more important than our stock. And we don’t even consider the value of humans in our economic model. We are liquidating our most important asset - the Human Being - (the engine) to keep the “transactional volume” high on a spreadsheet. When human beings should be the center and most important part of an economy.

The “Downhill” Economy

When a home doubles in price without a single brick being added, GDP rises, but the nation gets poorer. We have mistaken the rising cost - speed for the creation of wealth.

Look at the state of the world in 2026:

• Birth rates are in a global freefall.

• Debt is at record highs.

• Productivity is stagnant.

And yet, the “experts” point to GDP growth and tell us we’re doing fine.

This is the definition of “overtaking going downhill.” We have financialized the basic infrastructure of life - housing and health - turning them into “extractive assets” that eat away at the individual’s surplus.

The Solution: Surplus Economics

An economy is not better because of the level of transactions; it is better because of the capacity and ability of its people.

We need a new philosophy:

The Surplus.

Real wealth is not the volume of money moving through a system. Real wealth is the capacity of the people

Individual Surplus - what a person has left over in terms of time, health, and capital after their foundation is secured, and their ability to create to live, and reproduce.

An economy is not stronger because it is going faster. It is stronger because it has a better engine.

Sometimes you need to take a pitstop to slow down and rebuild the engine, and to build a better economy we need to see GDP as an indicator not a goal.

By continually pushing an economy to its limit, by measuring in the wrong way, we are overtaking going downhill.

It’s time to stop looking at the speedometer, and start building a better engine.

It’s not getting stronger, it’s not getting bigger.

It’s liquidating it’s most important asset

Humans.

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GDP was introduced in 1934 and was never intended to be a target, but one of many measurements on the health of the economy. It is increasingly being questioned as it is having a perverse effect that distorts the economy.

As GDP is the measure of activity in the economy, it doesn’t differentiate between good activity and bad activity. For example an oil spill or a car crash will boost economic growth, as will raising costs of living. It actually incentivises extractive economics rather than value creation because it doesn’t differentiate between the two, and extractive economics is much easier and immediate. It incentivises liquidating the stock - including the human capital and infrastructure, and incentivising debt. All things that increase economic activity in the short term, but damage economic capacity, and growth in the long run.

It is the same as going to a doctor and saying: “I’m healthy, I ran 30km this week” but the doctor doesn’t look at heart rate variability, diet or general health, and just incentivises running more next week.

GDP acts as a master incentive on the economy. It guides government policy, which makes up almost 40% of the economy in most developed countries, and it incentivises policies from immigration to education and housing and infrastructure.

One of the ways to grow GDP is to eat away the consumer surplus. Consumer surplus is the difference between what you are willing to pay for something, and the price you do pay. By increasing prices on certain goods that are inelastic - housing, energy, education, healthcare it grows GDP.

And this is exactly what has been happening.

Another way we can increase GDP is by bringing more of our human exchanges into the transactive economy. If the state or market takes on more of these transactions - such as with onlyfans, tinder, and the welfare state, the GDP grows - is this a benefit for society?

The problem is that if the GDP is rising while our consumer surplus is falling, there is less left for the productive part of our economy. A healthy economy is one where the Surplus is maximized, not the Transaction Volume.

What should replace GDP? A host of KPI should be used, including possibly anonymised health, and birth rates can also be considered as a measure of consumer surplus and forward optimism. Also a balance sheet perspective which considers human capital, and infrastructure. Warren Buffet emphasizes analyzing balance sheets for a company’s true financial health, looking for low or no debt, high cash reserves, consistently growing retained earnings, and minimal preferred stock, as they are harder to manipulate than income statements and reveal a company’s long-term stability and competitive advantage (moat). The same should be the case for countries.

Moving to a balance sheet perspective would see us recognising and investing more in health, childcare, and put an economic value on life, where it is currently viewed as a cost.

What is Infrastructure?

Another point is that there are rising costs in housing, education and healthcare. But why is that?

Infrastructure is defined as:

the basic physical and organizational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise.

Housing is artificially limited and this is to support GDP growth. They have become financialised and more of an investment asset than a place to live.

The problem is that as these costs rise, and GDP rises, they eat away at the consumer surplus, leaving less available for the productive economy.

Housing, education and healthcare are often framed as private benefits, but they actually fall under the above definition of infrastructure.

The debate is usually more about how should pay for it? The state or the market? Rather than recognising their value beyond price.

In order to grow our economy in the long run we need to move beyond GDP and recognise the value of infrastructure

Think of the economy as having two distinct layers. The first is the platform layer: this is the essential infrastructure everyone needs to function, work, and innovate.
The second is the market layer: this is the world of consumer goods, technology, and competitive services where innovation, choice, and efficiency can flourish.

Infastructure is defined as
the basic physical and organizational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise.

The core economic mistake of the last few decades has been to treat the platform layer like the dynamic layer, letting it become a primary source of profit maximization, but only been semi-privatising it, such as housing, where planning restrictions limits supply, and energy.

It is like handing over roads to private companies and allowing them to put up tolls on a road. People will travel less, and it slows the economy down. This creates a blackhole that drains the rest of the economy.

The solution is that we need to fix the platform layer which has huge positive benefits for the economy. Instead of maximising profit, we should subsidise or invest to maximise the consumer surplus - the difference between the price you are willing to pay, and what you do pay.

Let's see how this works with a practical example.

Consider a software engineer earning a solid salary, say $150,000 a year.

In Economy A, the platform is incredibly expensive. Her rent or mortgage consumes 40% of her income. Her family's health insurance premiums and out-of-pocket costs are astronomical. Saving for her children’s college education feels like funding a major corporation. After covering these basics, her high salary feels surprisingly small. She has very little discretionary income left to spend, save, or invest. Her economic power is effectively trapped, spent simply to secure her place on the platform.

Now, let’s imagine Economy B. Here, the society has made a strategic decision to treat the platform as what it is: essential infrastructure. Housing is managed to be affordable, healthcare is a predictable and manageable expense, and higher education doesn't require a lifetime of debt. Our engineer earns the same $150,000 salary.

The difference is transformative.

With her platform costs low and stable, a huge portion of her income is now freed up. This surplus doesn't just sit there; it ignites the dynamic layer of the economy in a positive feedback loop:

• She buys a new EV, supporting innovation in manufacturing and sustainable energy.

• She invests a portion of her savings in a promising tech startup, directly fueling research and development.

• She spends more at local restaurants, shops, and entertainment venues, driving small business growth in her community.

• She can afford to buy the latest consumer electronics—products that are constantly getting better and cheaper thanks to fierce competition in the dynamic market.

Not only does this allow her more resources, it frees up her mind to think bigger and perform better and to expand.

The conclusion is simple. The most effective strategy for widespread prosperity is to stop trying to squeeze maximum profit from the foundational platform. The goal for healthcare, housing, and education should be to deliver them at the highest quality for the lowest possible cost.

Doing so creates a massive economic dividend. By minimizing the cost of entry to a productive life, we maximize the amount of capital, talent, and demand that can flow into the dynamic, innovative sectors of the economy. An affordable platform is the launchpad for a thriving, inventive, and genuinely wealthy society.

"Demography is destiny" Auguste Comte

Birth rates are falling all over the world in every economy.

This one of the core economic problems of our time and is leading to all sorts of economic and political issues. It is increasingly unsustainable and leads to an increase in debt, a failure to grow, increasing reliance on immigration, and the follow on issues that arise.

Without a clear understanding of this this issue, it will continue to compound.

I have a unique insight into this because I grew up with 2 brothers in the UK countryside and I've lived in China which now has one of the lowest birth rates in the world. I have also lived in UAE and I speak to students all over the world making study, career decisions and from this wide range of conversations and life experiences from different systems I've noticed a pattern that I feel compelled to share.

Why is it a problem? Because fewer young people means a shrinking workforce and shrinking economy. Our whole economic system relies on increasing growth, without it, our whole economic model unsustainable. This puts more pressure on young people, which increases the problem and it becomes a self reinforcing cycle.

The common theories are that people are prioritising education, careers, and that housing is less available, and that living costs are going up. But I argue that those are symptoms, and not the root cause and would like to propose what I believe the link and an explanation is, and start with biology.

There are three core points:

• What is carrying capacity?

• Housing Supply

• GDP-Growth Economic Distortions

Our society is in demographic decline because we live in an economy that fails to produce sufficient housing, incentivises rising living costs and makes young people feel poor, and our instincts - shaped by evolution tell us not to reproduce when we sense there isn’t enough to go around. GDP focused growth amplify this squeeze by rewarding extraction, not long-term flourishing. To reverse this, we should reframe birth rates not as a problem but as an indicator of a problem in our economic model, and rethink what it means to build a sustainable, abundant, flourishing human-centric society.

Carrying capacity

The carrying capacity is the maximum population that a given environment can sustain given the availability of resources.

When a population exceeds its carrying capacity, it can lead to environmental degradation, resource depletion, and a decline in population size as the ecosystem can no longer support the excess individuals.

It can be incredibly risky for a species to overpopulate when there aren’t enough resources. In times of famine, and competition, animals conserve resources. In times of conquest, animals populate at a rapid rate.

It is proven that animals have an innate drive or unconscious instinct as to whether to populate their species more, in times of abundance, or to have fewer offspring, and I argue that humans have this same instinct too.

I argue that young people perceive that the carrying capacity has been reached, because of living costs and housing limitations, and so are not having large families. But this is not compatible with our economic system and incentives.

Housing & Living Costs

There is extremely strong evidence that young people are having fewer children because of lack of affordable housing. This aligns with when I speak to young people who are making career and life choices.

But is there less housing? There is evidence that not enough housing is being built. This is increasingly true in Asia, where fertility is some of the lowest worldwide, and large numbers of people live in cities (81% in Korea) compared to the countryside.

The reasons there are limited housing is that in many economies the housing market has been distorted. It has become financialised and has become more an investment and store of wealth, than a place to live. Housing markets worldwide are restricted and we are not building adequate housing to expand the carrying capacity.

With inadequate housing, young people need to live further from work, or spend more of their income on living costs. This gives them less money to spend on childcare, they perceive a smaller carrying capacity. They have less physical space to and this reality and these signals makes them less likely to feel the abundance and less likely to have children.

But why is there insufficient housing? Why don't we build more housing for young people? I argue that our economic system is creating these distortions.

GDP Creates Economic Distortions

The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above. Simon Kuznet, the creator of GDP.

Our primary economic goal is to increase growth. This is measured by GDP, this is a core KPI of our economic system. This KPI and goal, completely shapes all the worlds policy decisions to what to invest in, how to increase it from housing policy, to education to healthcare and more.

GDP was proposed in 1934 by Simon Kuznets an industrial economy recovering from the great depression. But it has some major weaknesses, and is increasingly seen as outdated. I argue that it is causing economic distortions which is leading the lower birth rates. These are compounding.

“Chasing GDP growth results in lower living standards. Better indicators are needed to capture well-being and sustainability” Joseph Stiglitz

What's wrong with GDP?

Gross Domestic Product is a sum of economic activity. It does not measure if that economic activity was good or bad.

GDP is like going to the doctor and saying: I'm healthy, I ran 100 miles last week, but ignoring your heart health, your diet, and your strength and ability to run next week.

It is an indicator that looks backwards instead of forwards. It incentivises debt and spending in the present, regardless of the future cost or potential value.

It's like a company focusing more on short term profit rather than long term direction, strategy and, customer satisfaction.

What are some of the things that can increase GDP? Spending on wars, increase in living costs. What are some of the things that are not included? Taking time off work to raise a child, learning online. Digging a hole and filling it up again is going to increase GDP, but raising a child or teaching someone how to program for free is not going to show up until they become productive.

Interestingly, investing in education and human are considered consumption figures, whereas investing in machinery are considered an investment.

I would argue that if you take everything away, in the knowledge economy, humans shouldn't just be counted as a component of the economy.

We are the economy. We are the primary capital asset

Monetising the Consumer Surplus

One of the core problems is that our focus on GDP growth leads to monetising the consumer surplus.

The consumer surplus is the difference between the price people are willing to pay and the price they pay. A large consumer surplus gives people the feeling that they can expand and have large families, it makes us feel like we are not yet at the carrying capacity. But when we monetise the consumer surplus, we feel we are at or near the carrying capacity, which causes a reduction in birth rates.

You could say that, when an economy runs out of ideas or productive areas for growth, the people become the resource to be milked. This is the low hanging fruit. Our system incentivise extraction rather than value creation because it doesn't differentiate between the two, and extraction is easier.

Every model of the world is a simplification, the question is, is it useful? It is clear that we need a more comprehensive measure of our economy.

Environmental & Sustainability Concerns

Economic distortion is not the only force restricting housing supply. In many developed nations, we face a powerful and often well-intentioned pressure: environmental preservation and sustainability. Concerns about urban sprawl, carbon footprints, and the protection of green spaces have led to stringent regulations and a cultural resistance to new development.

This creates a direct and painful conflict: the perceived long-term environmental health of the planet versus the immediate, foundational need of young people to find affordable homes where they can build their own lives and our drive to grow the economy. This deadlock is amplified by our flawed economic model which doesn't effectively differentiate between good growth and bad growth.

Because our system is unable to place a clear economic 'value' on a thriving new generation, but it can assign value to undeveloped land or carbon reduction, the argument against building often appears more righteous or even economically sound in policy debates. This leaves young people feeling that their essential needs are secondary to other priorities, reinforcing the instinct that the 'carrying capacity' has been reached.

I would argue that our environmental and sustainability concerns are valid. We can sense that something is not sustainable, but we do not solve it by limiting our growth, but by updating the model to incorporate the factors that are important and to reflect reality.

Solutions

Falling birth rates is the canary in the coal mine that our economic system need updating. We need to solve the global housing crisis and move to more human focused long term KPI in line with our economic needs.

In order to boost birth rates we should reframe birth rates as a problem to solve but as a key economic indicator, a KPI in itself, that tells us something about the nature of our economy.

Birth rates is not just important because it is a measure of the future productive capacity of the workforce and future strength of the economy, but it measures the optimism and abundance of young people that is not measured and in GDP.

To boost birth rates we need to solve the housing supply, and increase the feeling of abundance and optimism for young people.

Treating land as a profit-maximizing resource is like putting tolls on public roads then wondering why traffic, commerce, and growth slow down. Housing is core civilisational infrastructure essential for future growth and flourishing.

In order to do that we need to redesign and update our GDP focused economic model that incentivise extraction.

Creating a dashboard new human focused KPI, considering birth rates and other human focused metrics that show a forward looking signal that indicates young peoples optimism.

Using a balance sheet approach which includes the value of people as a core component and which can show assets and liabilities and will also reduce the incentive away from unsustainable debt.

"I spend more time looking at balance sheets than I do income statements because there's certain things that are harder to hide or play games with on the balance sheet" Warren Buffet

On a practical level, could assigning a value of a child on our economic model result in more children? If not just for their future earning potential.

A balance sheet can also consider the future environmental value of our resources as an asset.

As our economy matures much of what is valuable is not being measured, and if we are don't value it, we are not incentivising or protecting it, and we are in danger of losing what is most valuable.

Let's start to really recognise the true value of teachers, on healthcare, on housing, not for their money that is exchanged, but because what they are doing is valuable and important and building our future strength.

Ironically, less focus on GDP is likely to see more GDP growth.

Let's update our economic KPI and build a more abundant future.

Now I’ve written the diagnostic, here are solutions in more detail here.

We can also come together to build new towns.