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.

Subscribe now

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.

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.

____

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.

Subscribe now

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.

Subscribe now

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.