Tuesday, November 25, 2025

NVIDIA's Distinction: Is there an AI bubble?

In The Theory of the Leisure Class, Thorstein Veblen coined a number of terms that have become terms of art: conspicuous consumption, conspicuous waste, pecuniary emulation, invidious comparison, and invidious distinction. He introduced the latter term as it pertained to different kinds of employment in a "higher barbarian culture":

...the distinction between exploit and drudgery is an invidious distinction between employments. Those employments which are to be classed as exploit are worthy, honourable, noble; other employments, which do not contain this element of exploit, and especially those which imply subservience or submission, are unworthy, debasing, ignoble.

According to its CEO, Jensen Huang, NVIDIA took its name from the Latin invidia, meaning envy. In a now legendary seven-page memo sent to Wall Street analysts, NVIDIA's investor relations team refuted claims that its "current situation is analogous to historical accounting frauds":

NVIDIA does not resemble historical accounting frauds because NVIDIA’s underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity,” the memo said. “Unlike Enron, NVIDIA does not use Special Purpose Entities to hide debt and inflate revenue.

Coincidentally, NVIDIA replaced Enron on Standard and Poor's 500 stock index on November 28, 2001, as reported in the Los Angeles Times on November 30:

Enron, which had been a component of the S&P; 500, was removed at the end of trading Thursday and replaced by Nvidia Corp., a Santa Clara, Calif.-based maker of computer-graphics chips. As index funds sold Enron and bought Nvidia, Nvidia jumped $2.25 to $53.61 on Nasdaq.

Indeed, as the memo said, "NVIDIA does not use Special Purpose Entities to hide debt and inflate revenues." NVIDIA openly invests in companies that buy its products and reports that around 58% of its revenue are accounts receivable. I am not an accountant but that doesn't look like accounting fraud to me. It looks like something else. 

My interest in artificial intelligence has more to do with the noun than the adjective. Intelligence is a qualitative term that has been widely misunderstood and misused in the field of education. It all began with a "construct" that was devised to diagnose developmental/intellectual deficits in young children. This was, naturally, meant as a time-saving device since observation of the children would reveal more about the children's abilities but would be time consuming.

As so often happens, a short cut evolved into the standard of practice. Moderate correlations have been found between IQ scores and school grades and occupational success. But correlations are not proof of causation and even those findings may have been skewed by publication bias and poor research design. In other words, the validity of IQ tests as a predictor of performance is questionable. This is not to say that IQ scores are therefore inherently invalid. Only that their meaning and usefulness are not unambiguously clear.

When a term that is already ambiguous is used as a metaphor for another thing that is poorly defined, it descends into murkiness. Large language models perform some tasks that replace intellectual labour. That doesn't mean, however, that they do so intellectually or intelligently. A machine that replaces some functions of skilled labour doesn't thereby acquire any skill. It simply repeats certain motions that have been built into it. Large language models are, by definition, large. So there's that. But it is still just carrying out very complex instructions.

There are four glaring problems with the data center building boom. 1. So far, nobody is making money from selling their AI services. 2. The expectation is that AI will make money by replacing labour. I am not sure anybody has run through the economic demand side implications of that. 3. Energy and water. The U.S. is currently the world's largest producer of petroleum liquids, which depends on a delicate balance of low interest rates to finance investment and prices that are high enough to make it profitable but not so high as to crash the economy. Balancing data center energy requirements with energy supplies may have unfortunate knock-on effects for residential consumers. 4. Security. Protection against AI crime will be an afterthought, as it was with internet crime. I've read that adversarial poetry can defeat current LLM safety protocols. Who knew?

These problems are all in addition to the fact that attributing intelligence to large language models will not make it anything other than magical thinking. Veblen's invidious distinction between exploit and drudgery gives an important insight here. NVIDIA's $4.5 trillion capitalization is based on investors' perception that its future profitability will be based on exploit, not on drudgery. This is why its operations are viewed as "worthy, honourable, noble." NVIDIA's distinction is an invidious distinction.



Monday, November 3, 2025

Artificial Dementia

Economic “growth” is a euphemism for the desired outcome of government and corporate policies to countermand chronic overproduction intrinsic to capitalism with engineered “overconsumption,” largely through artificial obsolescence of commodities, the arms race, which is driven by yet another strand of artificial obsolescence, and so-called “demand management.” The third strategic pillar in the overconsumption drive is the collaboration and/or compliance of intellectual labour required for designing and carrying out the overconsumption policies – the proverbial “professional-managerial class” or PMC. Amnesia, narcissism, alienation, or dementia are metaphors for the consciousness determined by the artificial obsolescence mode of overconsumption.

In Social Amnesia (1975), Russell Jacoby argued that purported innovations in psychoanalysis were not necessarily improvements. He borrowed the insight from Herbert Marcuse that the much heralded “obsolescence” of Freud’s thought was akin to the planned obsolescence of consumer durable goods:

The evident acceleration of production and consumption in the economic sphere, and hysteria and frenzy in life itself, does not preclude that a fixed society is simply spinning faster. If this is true, the application of planned obsolescence to thought itself has the same merit as its application to consumer goods; the new is not only shoddier than the old, it fuels an obsolete social system that staves off its replacement by manufacturing the illusion that it is perpetually new.

Christopher Lasch wrote an introduction to Jacoby’s book. Four years later his The Culture of Narcissism: American Life in an Age of Diminishing Expectations was published. U.S. President James Carter’s 1979 “Crisis of Confidence” speech was inspired, in part by Lasch’s book, although Carter missed its point. Social Amnesia and The Culture of Narcissism shared their extension of diagnostic terms for individual “disorders” to a collective. Both authors also referenced planned obsolescence. It is a recurring subtext in Jacoby’s book. In Lasch’s, it appears in one section that addresses aging and contemporary society’s “instrumental view of knowledge, according to which technological change constantly renders knowledge [and wisdom] obsolete and therefore nontransferable.”

The term “planned obsolescence” was popularized in the 1950s by industrial designer, Clifford Brooks Stevens, who designed the Oscar Meyer Wienermobile:

Our whole economy is based on planned obsolescence, and everybody who can read without moving his lips should know it by now. We make good products, we induce people to buy them, and then next year we deliberately introduce something that will make those products old fashioned, out of date, obsolete.

The idea of making obsolescence the cure for chronic overproduction and the cornerstone of a new consumption-led prosperity was first fully articulated in investment banker Paul Mazur's American Prosperity: Its Causes and Consequences (1928). The word “obsolescence” appears 41 times in the book and “obsolete” another ten times. “Obsolescence is a great force in the recreation of consumer markets,” observed Mazur, “and as such will be an essential factor in the economic future.” Mazur’s friend, advertising executive, J. George Frederick, adopted Mazur’s argument and prefixed the uplifting adjective “progressive” to it in his article, "Is Progressive Obsolescence the Path Toward Increased Consumption," published eight months after American Prosperity. Vance Packard’s The Waste Makers (1960) decried planned obsolescence. Influenced by Packard’s book, Herbert Marcuse cited planned obsolescence frequently as one of the mainstays of 20th century capitalism.

In his 1971 Deutscher Memorial Prize Lecture, Alienation and Social Control, István Mészáros referred to the concept as artificial obsolescence, and that seems to me a more apt descriptor. Mészáros was awarded the prize for his 1970 book Marx’s Theory of Alienation. Alienation is another recurring theme in both Social Amnesia and The Culture of Narcissism, especially the former. But Mészáros’s – and Marx’s – examination probes beyond the psychological symptoms of alienation to its ground in the objectification of the labour process in which the workers’ surplus labour time is appropriated by and enlarges the capital that exercises power over them. Alienation, in this analysis, refers not merely to a psychological symptom but to a real social relationship in which the product of the labourers’ own actions are transformed into an alien power that stands over and against them as capital.

In a sense, Lasch’s narcissism and Jacoby’s amnesia are synonyms for Marx’s and Mészáros’s alienation – albeit with subtle distinctions. In a passage, relating alienation to consumerism, Lasch wrote, “the propaganda of consumption turns alienation itself into a commodity. It addresses itself to the spiritual desolation of modern life and proposes consumption as the cure.” Jacoby decried equally the “reduction of the Marxist theory of alienation to a subjective condition by liberal sociologists” and the counter-culture conceit of Theodore Roszak that "[t]he revolution which will free us from alienation must be primarily therapeutic in character."

Why artificial dementia? Admittedly dementia, as a metaphor, can be viewed as yet another nuanced synonym for alienation. But there are two main reasons for choosing dementia. First, it refers to a degenerative condition, unlike the arrested development of narcissism and the possibly reversable condition of amnesia. Second, a recent “personal view” in The Lancet Healthy Longevity focused on the relationship between clinical dementia and temporal inequity: “The unequal distribution and control of time across individuals and groups, shaped by structural and social conditions, constraining opportunities for brain-health promoting activities.”

In his 1971 lecture, mentioned above, Mészáros spoke briefly about the function of “artificial obsolescence” (and other artificialities) as “an antidote to too much ‘disposable time’ – to spreading knowledge and to increasing social consciousness…” In subsequent articles and books, over the course of five decades, Mészáros wrote extensively and passionately about the key role disposable time would have to play in any transition away from capital’s increasingly destructive and wasteful drive for solely profit-oriented “minimal time allowed in production.” “The only conceivable way out of such contradictions from the standpoint of labour,” he wrote in a 1988 article, “– namely, the general adoption and creative utilization of disposable time as the orienting principle of societal reproduction – is of course anathema to capital.” That is to say, a more just and equal “distribution and control of time across individuals and groups” advocated by The Lancet article’s authors would be anathema to capital.

It is one thing to write the above conclusion. It is another to demonstrate the analysis behind it. I have reviewed István Mészáros writings on disposable time, some of which are clearer than others. In my view, his best discussion occurs in a 1995 article, “The Communitarian System and the Law of Value in Marx and Lukács” that is also compiled in the book published the same year, Beyond Capital: Toward a Theory of Transition (1995). The article is structured around a critique of György Lukács’s 1968 book, The Process of Democratization (originally published as Demokratisierung Heute und Morgen). Lukács had been Mészáros’s mentor before 1956 when the latter left Hungary after the suppressed uprising.

In The Process of Democratization, Lukács criticized Stalin’s claims that the law of value, “is a historical category and thus related to the existence of commodity production. If the production of commodities ceases to exist, value in its manifestations and the law of value likewise disappears.” Lukács countered that position with a quote from Marx “that the share of each individual producer in the means of subsistence is determined by his labour-time.” The rebuttal to Lukács from Mészáros was not in any respect a defense of Stalin’s argument. He pointed out that Marx had qualified the statement as assuming “merely for the sake of a parallel with the production of commodities.” Mészáros relied on key passages from the Grundrisse to argue that the law of value based on the appropriation of labour time would be superseded in a post-capitalist economy of time by the maximization of disposable time. There would still be an “economy of time” but it would be an economy of qualitatively different times. An appendix to this post contains the passage where Mészáros makes his remarkable disposable time analysis, which draws on notebook VII of the Grundrisse. In other writings, he cites passages about disposable time from notebook IV. What is remarkable about Mészáros’s faithful reading of those notebooks is that it hasn’t become the standard interpretation of Marx since publication and translations of the Grundrisse.

The use of a diagnostic term like dementia as a metaphor carries with it the risk of amplifying the stigma associated with the condition. This is another reason I chose artificial as the modifier, rather than, say, social. Social dementia has a few prior usages. Ruth Sanz Sabido used the term in Memories of the Spanish Civil War: Conflict and Community in Rural Spain: “...this book suggests the term 'social dementia,' a concept that highlights the negative and 'degenerative' consequences that the loss of social memory may inflict on a particular group or community.” Sabido points out the difference of choice or the lack of it “between forgetfulness in dementia sufferers, on the one hand, and socio-politico-legal oblivion, on the other… a person does not choose to suffer dementia, and has no control over the effects and reach of the disease.”:

The matter becomes more convoluted when we consider political and legal oblivion, which is a choice for those who impose it, and is welcomed by those who agree with, or benefit from, the erasure of the past. For those who do not support this form of suppression, but are forced to forget their own history, there is no question of choice.

Svjetlana Nedimović has spoken, in an interview, of the “engineering of social dementia” and elsewhere has written about “the engineering of political dementia.” She also worried about the potential misuse of clinical terms as sociological metaphors:

One cannot be too cautious when employing medical terms in relation to the phenomena of social life. I do not, however, suggest turning this metaphor into a diagnosis or concept. It is meant to help visualise the effects upon society of barring ways into its past and denying its experience. The metaphor conveniently, even if provocatively, links technical and medical jargon, which indicates the intentional crafting of desired outcomes, which then turn out to have semi-desired implications.

The notion of “semi-desired implications” is suggestive. It is a way for officials to disown responsibility for “unintended consequences” or “collateral damage” even in the event of those consequences being readily foreseeable. The loss of social memory is the loss of historical time. “Disposable time is the individuals’ actual historical time,” Mészáros wrote in 2007, “by usurping the role of real wealth and subverting the potential use to which it could be put, capital is the enemy of historical time.”

Of course, artificial dementia resonates with that other currently fashionable artificiality, known as “intelligence.” To the extent that source data for large language models is contaminated with politically-motivated erasure and falsehoods, the output will tend more toward dementia than intelligence, making literal Nedimović’s metaphor of engineering social or political dementia. To paraphrase Juvenal, “who will guard the data?” But the motivation for the immense investments in AI is an even bigger revelation. It is the planned obsolescence of the intellectual labour of planned obsolescence. Where 19th century capitalism sought to minimize the necessary labour time of productive labour, AI investment strives to minimize the necessary labour time of control labour. There’s no question this would be profitable for a single capital to do. But each capital views the workers of all other capitals as consumers of its products:

To each capitalist, the total mass of all workers [including PMC intellectual workers], with the exception of his own workers, appear not as workers, but as consumers, possessors of exchange values (wages), money, which they exchange for his commodity.