Wealth Always Hits a Limit
Even in the AI era, accumulated wealth will meet its limits through currency, consumption…and politics
Welcome to the first edition of Drift Signal for 2026!
This year, I am committing to two deeply researched and thought-provoking editions each month, or roughly twenty-five across the year. If there is a topic you would like me to dig into later this year, feel free to reply with ideas 🤗
A few weeks ago, I was invited as a guest on Demetri Kofinas’s Hidden Forces podcast. Here’s the link to the full episode in case you would like to listen 🎧 One highlight of my conversation with Demetri was our discussion on the social contract in the age of computing and networks. It is a subject I wrote about often in the late 2010s (even a whole book!), but one I have not explored in depth since 2020.
That conversation made me realise that this question has not gone away. If anything, it has sharpened. There is this growing view that current progress in computing and networks (that is, AI) will make large parts of the workforce redundant while pushing wealth into ever fewer hands. This view is now common, and it is voiced not only by critics but by prominent tech leaders themselves.
My first reaction to this idea is…deep skepticism. The claim that technology drives labour toward irrelevance, destroys demand, and leads to feudalism echoes Marx’s theory of technological determinism. Marx argued that the development of productive forces under capitalism would eventually create a conflict with existing social relations, concentrating wealth and displacing labour. Yet history has not borne this out in the simple way he predicted. While technology has indeed transformed work and displaced certain jobs, new industries, markets, and forms of labour have always emerged instead of rendering work irrelevant or returning society to feudal structures.
Still, the more I thought about it, the more I realised why this idea feels convincing. It’s not that the logic is inevitable—it’s that we don’t know where to look for an exit. That uncertainty makes the whole system seem unavoidable, even if it isn’t.
This edition follows that line of thought. It seeks to show where the limits on wealth concentration now lie and why capitalism will always correct itself, regardless of our current outlook. In short, the system must still reach a limit—and I expect the change to come through a mix of currency moves, a sharp fall in consumption, and ultimately a (potentially brutal) political backlash.
1/ Capitalism rewards those who escape competition
Capitalism, in its purest form, is about escaping the market. While standard economics praises perfect competition, the historian Fernand Braudel defined capitalism as “attenuating the rigorous competition in the market economy by ‘inserting’ capital into the production process”. Many later echoed this view. Peter Thiel famously summed it up in his book Zero to One when he wrote that “competition is for losers”. The aim of any ambitious capitalist firm is to reach ‘escape velocity’, moving beyond price wars and thin margins into a position of full control.
To understand the capitalist journey, we must read the economic landscape through two opposing faces, each shaped by distinct unit economics:
The ‘Southern Side’ is the domain of intangible assets such as software, money, and intellectual property. The unit economics rest on high fixed costs and near-zero marginal costs. The key feature here is increasing returns, where output grows faster than inputs. Value can rise through supply-side scale and/or demand-side network effects, as early spending on research and infrastructure spreads across a vast and growing base of users or transactions. The further a firm pulls ahead, the faster profits and value grow.
The Northern Side is the world of physical assets and institutions: factories, labour, logistics, and regulation. The unit economics combine high fixed costs with heavy variable costs. Although there are increasing returns in manufacturing (Wright’s law), each new site, such as a warehouse or plant, adds complexity, risk, and expense. This is why, beyond a certain point, these activities face diminishing returns, as the cost of managing size and physical flow eventually exceeds the gains from further expansion.
It is rare to operate on the Southern Side alone, but capitalist power emerges when gains from the Southern Side more than offset the weight of the Northern Side. This success, however, cuts both ways. Nations that host these Southern Side giants, such as the US with Silicon Valley’s tech, Wall Street’s financial services, and Hollywood’s IP, often end up in a hegemonic dead end. By favouring the export of bits and financial claims over atoms, they drive a structural hollowing out of domestic manufacturing, whose economic returns cannot compete with those of Southern Side businesses.
2/ The global thermostat is failing
Standard economic theory promises a ‘self-correcting’ world, where exchange rate discipline acts as a global thermostat. In a textbook economy, success at doing capitalism triggers capital inflows, which appreciate the currency, make exports more expensive, force a rebalance, and ultimately impose hard limits on wealth accumulation in any given place.
But this logic doesn’t apply to today’s America. When a nation’s primary exports are no longer tons of steel but lines of code and claims on global income, the thermostat breaks.
This “Dutch Disease” of the age of computing and networks explains why the US will have a hard time reindustrialising. Because the world requires massive dollar liquidity—the dollar still being the dominant reserve currency—demand for it is inelastic. When the US tries to reduce outflows through tariffs for instance, it only creates a global dollar shortage. This strengthens the currency further, making American atoms (manufacturing) permanently uncompetitive while reinforcing the dominance of its bits (Southern Side assets).
As I wrote last year, the US now operates less like a nation-state and more like a global investment firm—America Capital Partners. Thanks to the dollar’s “exorbitant privilege”, America captures fees through the erosion of the dollar’s value (= inflation) and carried interest through asset appreciation (= the booming stock market). Just as 19th-century Britain maintained dominance through “invisible exports” while its industrial base declined, the US now relies largely on extracting value from the rest of the world through businesses—tech, finance, and IP—concentrated on the Southern Side.
And this explains the current accumulation of wealth by the American few. In this winner-takes-most US economy so concentrated on the Southern Side, increasing returns easily bypass any distributive promises left. Wealth no longer spills over through markets or the institutions designed to curb its excesses, such as collective bargaining—which mostly exists on the factory floor, not elsewhere in the economy. Instead, wealth concentrates within the American ‘Owner’ class, those who own and operate business on the Southern Side, creating a system where success drives structural distortion rather than stability.
3/ Manufacturing has a natural ceiling
In the physical world of atoms, currency still rules and acts as a balancing mechanism. Manufacturing provides the clearest example of where textbook economic discipline still functions because it deals in tangible goods, where price competition is fierce and margins are thin. In this sector, a 10% swing in the exchange rate can instantly erase a decade of productivity gains.
This creates a natural ceiling: if a nation becomes too successful at exporting goods, its currency appreciates until its factories become uncompetitive. Maintaining a prosperous industrial engine is like running a race in an airtight room. If you run too fast, you consume the oxygen (the currency rises) and eventually collapse (exports slow down). This, in turn, imposes a limit on the concentration of wealth in the hands of industrialists.
Manufacturing powerhouses like Germany and China have survived not by stopping the race but by installing secret vents to keep oxygen levels artificially high:
Germany is a freerider in the eurozone. By sharing the euro with less competitive neighbours, Germany keeps its currency weaker than a standalone Deutsche Mark would be. It pairs this with active wage restraint, keeping domestic labour costs below productivity gains.
China implements widespread financial repression and currency management. Artificially low interest rates transfer wealth from household savers to subsidise strategic manufacturing. In addition, strict capital controls and an undervalued renminbi anchor this export-led model by preventing domestic wealth from fleeing.
For the US, meanwhile, the manufacturing train has long left the station. As the issuer of the global reserve currency, America must supply dollar liquidity to the world. This monetary setup, however advantageous, makes defending America’s domestic manufacturing sector impossible: any attempt to shield Northern Side industries operated by American ‘Makers’ triggers dollar scarcity, strengthens the currency, and accelerates the hollowing out of American atoms. Hence the system leaves the US reliant on its current Southern Side dominance—software, finance, and IP—because the structural conditions forbid a return to industrial self-sufficiency. And as a result, the only way forward for America is to double down on the Southern Side and thus to serve the interests of its Owners.
4/ Owners control the system
To be clear, ‘Makers’ in this edition are those who operate the Northern Side of physical production and are tied to factories, labour, and the limits of tangible goods (think: Boeing and Detroit). By contrast, ‘Owners’ dominate the Southern Side of software, financial services and IP, where scale, mobility, and legal control allow wealth to grow largely unconstrained (think: Silicon Valley)1.
This distinction is crucial because it explains why some actors can accumulate extraordinary power while others remain trapped in competitive, low-margin markets.
Owners operate in a space where the usual constraints of currency, local regulation, and industrial cycles barely apply. While a Maker is a prisoner of manufacturing’s unforgiving unit economics, an Owner is a landlord of their own network. Controlling a global software platform, a leading AI standard, or a top-tier luxury brand gives them advantages no Maker can match. Their wealth is embedded in assets that generate returns anywhere in the world, and their position compounds over time.
The key features of the Owners’ advantage are: