It’s the kind of bet that Nathan Detroit might call “very big potatoes”. But for the tech barons, it’s nowhere near big enough. Meta, Alphabet and Amazon announced earlier this month that they needed to raise more than $600 billion this year to fund spending on AI data centers. And although Elon Musk’s xAI raised $20 billion in December, he’ll need far more if he wants to remain competitive. Hence his proposed IPO this summer, when he’ll invite millions of ordinary people to finance the “Muskverse”.  

Much of this money is being spent on building vast, energy-guzzling data centers to power the smarter-than-human machines. Such infrastructure will be vital for any tech oligarchs hoping to win the war for AI dominance. “We have decided,” said OpenAI boss Sam Altman in October, “that it is time to go make a very aggressive infrastructure bet … But to make the bet at this scale, we kind of need the whole industry, or a big chunk of the industry, to support it.”  

Now that tech giants are raising and spending other people’s money, how confident can investors be of getting repaid? The truth is companies such as OpenAI are likely to run out of cash before their tantalizing new technology produces profits. That is why, having used up their own voluminous supplies of cash, AI companies are now being forced to borrow, or go public — with no certainty that the billions of dollars invested will generate revenues sufficient to compensate millions of small-time investors. Last November, Big Tech stocks sold off sharply as shareholders balked at what the Financial Times called “the gargantuan capex plans” of Silicon Valley tech bros, and worried that their investments were unlikely to generate a return.

Big tech gamblers have deceived us before. After all, it was not long ago that we, the trusting public, were offered an equally enticing product: the internet. The original internet wasn’t just a network. It was meant to be a nervous system for humanity. A decentralized oracle. A library of Alexandria that no empire could burn. “Information wants to be free,” we were told. “No one owns the net — it belongs to us all,” we believed. 

Their promises turned out to be false. Instead, the internet has become utterly enshittified. There are few platforms or devices whose user experience has not degraded.  

Nor was it long ago that Mark Zuckerberg made a bet of more than $100 billion on the “metaverse” — a virtual-reality world to which he was so committed he changed Facebook’s branding to Meta. Yet now it seems that bet is off. As financial journalist Robin Wigglesworth noted: “The whole metaverse thing now seems to be completely memory-holed by everyone — including Zuckerberg himself.” As of the end of 2024, the cumulative losses suffered by Meta’s Reality Labs division stood at $68.9 billion. Big potatoes indeed. 

It seems that AI, too, is on the path to enshittification. Last October, Altman announced that, as part of OpenAI’s “treat adult users like adults” principle, the company would be allowing erotica on the platform. Now, he’s gone further. Because AI is expensive to run, OpenAI has started testing advertising on ChatGPT. Zoë Hitzig, a former researcher at the company, resigned over the issue last week. In a New York Times article, she warned that: “For several years, ChatGPT users have generated an archive of human candor that has no precedent, in part because people believed they were talking to something that had no ulterior agenda … People tell chatbots about their medical fears, their relationship problems and their beliefs about God and the afterlife. Advertising built on that archive creates a potential for manipulating users in ways we don’t have the tools to understand, let alone prevent.” 

The extraterritorial, largely unregulated space in which tech billionaires wheel, deal and speculate is defined by economists as the “international financial and monetary system”. I, however, in the spirit of J.M. Keynes, would call it the “Global Casino”. Tech titans are joined in this space by big corporate and individual speculators in the Casino’s markets for money, food, energy and pensions, and by an unregulated shadow banking system that spews out easy, if shady, money.  

Though the Casino operates in an unregulated sphere, it remains tethered to the real bailout economy that the rest of us — the “little people” — live and work in. If the Casino goes down, central banks will have to bail it out. The gamblers know, as we do, that they are too big to fail, and too big to jail. 

Suggested reading

Can we escape AI slavery?

By Yanis Varoufakis

Of course, capitalism has always produced daring, creative risk-takers — those who dreamed of, invested in and built the railways, computers and the internet. What’s different today is that unlike railways, computers and the internet, AGI doesn’t exist. The AGI bubble may just be a vast techno-dystopian power play designed to put Silicon Valley bosses in political and financial control over a weakened global labor force. This is class war at its most brutal.

The Casino’s activities have already had a damaging impact on the real economy, and ignited a global political backlash. To my mind, it is the volatility, instability and imbalances of the Global Casino, rather than wages or the pandemic or even Big Tech, that is largely to blame for the ongoing cost-of-living crisis endured by most of the world’s economies since 2020. It is the Casino’s speculative global markets for agricultural goods and energy that have led to volatility in the prices of key commodities, and that in turn has driven up the cost of living. That has led to a worldwide clamor for protection from markets that deny consumers affordable food and energy, and in some countries affordable housing, health and education. Voters are increasingly turning to authoritarian leaders who promise to protect the public from the out-of-control Global Casino and the system’s attacks on living standards. 

To restore stability to the global economy, and protect consumers from Big Tech, we must bring the Casino back down to earth and comprehensively transform the international financial architecture. This may be a grand ambition, but in the event of another global financial crisis, or even a catastrophic world war, it will be a necessary one. 

In the meantime, we must address the problem of speculation. It’s hardly a new phenomenon. For centuries people have gambled on future outcomes. For much of that time, the most honorable purpose of speculation was “hedging” — a form of insurance to deal with the uncertainty of the future. Judges, courts and the law have long recognized that there is a difference between hedging that serves a social purpose and hedging that is mere speculation. Speculation increases risk, leading to price bubbles, volatility, manipulation schemes and inflation — all characteristics of the AI bubble. In its worst form, it must be understood as rent-seeking: the attempt to acquire wealth not by creating it but by effortlessly extracting wealth from another.

Harvard Professor Lynn Stout suggests that we return to an older system. “The old common law rule against difference contracts was a simple, elegant legal sieve that separated useful hedging contracts from purely speculative wagers,” she argues. Under this system, the law would no longer be used to enforce the terms of a speculative contract if it were broken. 

This reform would bring speculators — and tech billionaires — back to reality and force them to think carefully before making bets at scale by inflating bubbles and encouraging speculation that cannot be honored by reference to real-world conditions and law.

“The most common way people give up their power is by thinking they don’t have any.”

― Alice Walker 

Today, the world is confronted by globe-spanning, tax-dodging corporate behemoths; monopolies based on advanced, intrusive as well as seductive technologies. Some are armour-plated cartels with ever-stronger (and longer) intellectual property protection. They include not only the FANGS – that bundle of high-tech platform utilities – but also Big Pharma, Big Agrobusiness, Big Media and Megabanks. The rise of these new monopolies has coincided with the lowering of real wages, especially in the UK and US, for many workers, and to a reduction in the labour share of the economy.

The process of monopoly (or giant oligopoly) creation has accelerated at a reckless pace.

As economic power has become more concentrated, so levels of corporate crime have risen. Perhaps the most egregious of these was the conspiracy involving Barclays, a 300-year-old British bank, in rigging the interest rate that people and corporations around the world pay for loans or receive for their savings. LIBOR – the London Interbank Offer Rate –was used as a benchmark to set payments on about $350 trillion worth of financial instruments.

The process of monopoly (or giant oligopoly) creation has accelerated at a reckless pace. But can this late-capitalist model survive populist uprisings across the world?  Can it survive the political instability caused by the gross inequality in wealth fostered by increased monopolisation?

For many decades, the USA operated a strong anti-monopoly (or “anti-trust”) policy.  Beginning with the Sherman (1892) and Clayton (1914) Acts, the federal government oversaw an era of active interventionism to regulate, prevent or break up monopolies, reaching a new peak with FDR’s New Deal in the 1930s. It is no accident that the strongest steps to control big finance and Wall Street ran in tandem with anti-trust laws – first with the creation of the Federal Reserve in 1913, and then with the Glass-Steagall Act of 1933.

In Britain, the home of ultra-laissez-faire ideology, action against monopolies was more restrained. Indeed, the common law doctrine of unlawful “restraint of trade” was traditionally used more against trade unionists than against any corporate’s “conspiracy against the public, or… some contrivance to raise prices” in Adam Smith’s famous phrase. True, from 1948, legislation was passed to give some limited powers over monopolies and mergers, but they were used more modestly than in the anti-trust heyday in the States.

-

Global monopolies were not created thanks to technology, or to entrepreneurial genius – but because we citizens let them happen

The big change in ethos came with the era of financial liberalisation, notably the Nixon-Reagan-Thatcher years, effectively endorsed in the Clinton-Blair period. First, the creation of a private monopoly was no longer seen as a bad thing (recall for example how at its peak Microsoft avoided break-up). Glass-Steagall was repealed in 1999, with support from Bill Clinton and the economist Larry Summers, symbolising the bi-partisan policy of support for hyper-financialisation.

The Reagan-Thatcher era also gave birth to the privatisation boom, with an ambiguous policy towards monopoly, leaving telecom giants in place, while also (in the UK) illogically fragmenting the rail network.

The myth propounded by recent governments is that the answer is more competition, with the public constantly checking prices (usually unfathomably expressed) from ever more new entrants to each utility. Everyone understands that this is a farce, since it relies on the inertia of the majority for a minority of customers to benefit. The attempts by regulators to police the system have likewise failed, so that customers have become victims of “regulatory capture”.

The EU runs a different competition and monopolies model, still (contrary to Brexiter mythology) from a strongly capitalist perspective. If the Anglo-Saxon model is founded on laissez-faire, the continental model has strong roots in German ordoliberalism, with its emphasis on rules and their enforcement. The European Commission takes its role more seriously in taking on cartels and harmful private sector monopoly acts. It was the Commission that forced the telecom oligarchs to abandon roaming charges. Its Commissioner Ms Margrethe Vestager (a staunch economic liberal) has taken on Google in ways not yet seen in the UK.

-

The great British public is supremely unconvinced by the past decades of privatisation

-

After decades of experience of privatised utility monopolies, in water, gas and electricity as well as rail, the great British public is supremely unconvinced. Polling by Populus and Legatum Institute showed that 86% said favoured public ownership of water, 77% gas and electricity, and 76% rail.  50% supported public ownership of banks.

The next step is for the British public to understand that it has the power to hold these companies accountable.

• This can be done by Parliament enacting tough anti-monopoly laws.
• Secondly, a democratic government can use its powers more effectively to break up companies that do not act in the public interest.
• Third, companies that have a strong public interest dimension should be required by law to fulfil public service obligations. Those obligations have already been imposed on the liberalised network industries in the EU, but public service obligations need now to be extended to companies in the gig economy.

Global monopolies were not created thanks to technology, or to entrepreneurial genius. They happened because we, as citizens let them happen. We must not give up our power to change this monopolistic system, by thinking that we don’t have the power. As citizens of democracies, we most certainly do.