If you want to understand the future of the economy, you have to stop looking at money.
Money is just a hallucination we agree on.
If you want to see the reality of the economy, you have to look at the physics, specifically energy. You must look at the Innermost Loop.
For the last 4,000 years, the engine of human civilization has been biology powered by the sun. It was a loop defined by the capture of photosynthesis, the output of cognitive insight, and the strength of muscle.
It looked like this:
Sunlight >>> Photosynthesis >>> Food >>> Muscle & Brains >>> Value
The sun shone on a field of wheat. That wheat captured about 1% of that solar energy. Then an ox (or a human) ate the wheat, metabolized it, and turned it into the mechanical energy to pull a plow or the cognitive energy to write a ledger.
This loop built the Pyramids. It built the Roman Empire. It built the modern world. But it is terribly inefficient. It is constrained by the biological limits of how fast corn grows and how long a human can work before they need to sleep.
The Phase Shift
Right now, on your watch, the Innermost Loop is changing. We are swapping the biological engine for a silicon engine.
The new loop looks like this:
Sunlight/Fusion >>> Electricity >>> Compute >>> AI & Robots >>> Abundance
In this new loop, we don’t rely on photosynthesis (1% efficiency); we rely on photovoltaics (23% efficiency) or nuclear (potentially infinite efficiency).
We don’t feed the energy into a stomach, we feed it into a GPU.
And most importantly, the output isn’t just “muscle” – it is “Simplified Intelligence.”
Energy is the Governing Prior
This is the mental model you need to internalize: Energy is the governing prior of the Universe.
In the biological loop, if you ran out of food (energy), the civilization collapsed. In the silicon loop, if you run out of electricity, the intelligence turns off.
This means that the “base layer” of our entire future economy is not the dollar, or even the microchip. It is the electron.
If you have abundant energy, you have abundant compute. If you have abundant compute, you have abundant intelligence. And if you have abundant intelligence, you can solve any problem (cure cancer, terraform Mars, reverse aging).
Three Key Examples
To understand how this shifts the world, let’s look at three core pillars of civilization through the lens of this new loop…
1. Labor: The Ox vs. The Humanoid Robot
The Old Loop: An ox (or a human laborer) is a biological battery. To get 8 hours of work, you need years of growth, acres of land for food, and 8 hours of sleep. The “maintenance cost” of biological labor is incredibly high because biology is inefficient.
The New Loop: A humanoid robot (e.g., Optimus or Figure) is a direct converter of electricity into motion. It doesn’t need sleep. It doesn’t need a pension. It just needs a steady stream of kilowatt-hours. When you swap the “Food-to-Muscle” loop for the “Electron-to-Motor+GPU” loop, the cost of labor collapses to the price of electricity.
2. Intelligence: The Scribe vs. The Token
The Old Loop: To get a verified mathematical proof or a legal contract in 1800, you needed a human expert. That human needed 20 years of education (calorie-intensive) and a salary (resource-intensive).
The New Loop: Today, you feed energy into a data center. That energy spins the fans and fires the transistors. Out comes a “token” – a unit of thought. We are currently demonetizing intelligence because we are moving it from a scarce biological substrate (brains) to an abundant silicon substrate (chips). We are turning watts into wisdom.
3. Capital: Gold vs. Bitcoin
The Old Loop: We stored value in mined gold or harvested grain. Why? Because they were hard to produce. They represented the “proof of work” of human mining or farming.
The New Loop: Bitcoin is the first currency that is explicitly tied to the Innermost Loop. It is “Proof of Energy.” It is stored energy. It creates a direct link between the physics of the Universe (thermodynamics) and the value of our economy.
The Ratio of Solutions to Problems
For centuries, the bottleneck of progress was that we didn’t have enough thinking. We had plenty of problems, but scarce experts to solve them.
The transition to this new loop solves that bottleneck. When we unlock increasing access to energy—whether through solar or fusion—we unlock the compute.
And once we have the compute, we don’t just solve the problem of labor… we solve the problem of answers.
We are moving from a world of “Scarcity by Design” (biology) to “Abundance by Physics” (technology).
The only limit left is the energy we can harvest.
Let’s get to work,
Peter
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Peter,
We met in the thin air of Madrid last November. I asked you a specific question about the Governance Gap, the lethal lag between exponential tech and linear policy, and you hesitated.
Reading this piece on the "Innermost Loop," I see why.
Your thesis relies on the assumption that solving the physics of energy solves the problem of scarcity. You view the "Loop" as an engineering circuit: increased energy \rightarrow increased abundance \rightarrow increased freedom.
But you are ignoring the friction of the Governance Gap.
When technology creates abundance, it destroys the State's primary leverage: dependence. A government does not look at a citizen with infinite, sovereign energy and see "progress." It sees a threat.
The "clash" I warned you about in Madrid is happening right here, in the Innermost Loop. The State will not simply become obsolete because we invented fusion or cheaper solar. It will panic. It will fill that Governance Gap not with policy, but with kinetic force, grid restrictions, "usage taxes," and centralization mandates.
The "Innermost Loop" isn't just about thermodynamics. It is about Jurisdiction.
If you solve the energy equation but ignore the regulatory hostility, you aren't building a loop of abundance. You are building a high-efficiency cage.
The gap is not a void, Peter. It is the battlefield.
I agree with your assessment of how learning, analysis, and production will all be improved and how money doesn’t need to represent physical gold but rather “value” itself.
Yet as wonderful as all this sounds, it still doesn’t address the key issues that seem to restrict and hold back societies and humanity.
I’m all for the advancements in technology. I’m using AI right now to help edit a book I’m writing; it’s quite amazing. However, I also know that what you are talking about are “tools” and “systems.” Yet the critical point always is, “What do ‘we’ do with them? For example, I could have let the AI write my book completely without my human involvement, or I could have used the AI as a tool to help speed up research and refinement to only assist. Hammers and knives have many possible uses.
What about the issues society faces now? Will all this technology actually improve it for everyone, or at least most people?
Money is needed for people to exchange for food and shelter, so altering the money does not alter this process.
When technology and robotics take over much of what people have done, what will people do for money?
If people get a basic income in place of working a job, who will determine and control what and how much? Will this make people more dependent on whoever is in control?
This leads us to a long-time primary concern: who has power and control? Will the system you portrayed merely be a new version of what we have now? Where a few individuals run the show and continually take as much as they can get away with? Please note, I am pro-business; it’s a wonderful thing. However, greed is something else.
Having solutions and production be more efficient is great, and even with information and computing power more available, who controls implementation the most is an issue.
Will this new system improve the power and control dynamics of a society, or merely add efficiency to those already in control? I’m sure you’ve noticed that the time savings from the advent of computers has ended up mainly benefiting companies, not the workers.
Will this evolving technology serve to break apart the have and have-not pattern societies seem to end up in? Or will it be a slightly different system of serfdom, where a few people basically dictate how the others live?