Citrini Research: THE 2028 GLOBAL INTELLIGENCE CRISIS

The substack article that caused big tech to fall, quite ironic ya?

Summarising Citrini’s points:

AI becomes so intelligent to the point where it substitutes white-collar labour, creating a self-reinforcing loop of wage compression, weaker consumption and financial instability. The end result here is an economic crisis.

There are parallels with the dot com crisis, oversupply of a certain something, which could lead to a bubble and a margin collapse of the financial markets. During dot com, we had an oversupply of capital, and an oversupply of infrastructure. In AI today, Citrini argues that we have an oversupply of both intelligence and infrastructure, causing the price of intelligence, and hence the price of labour, to fall.

Without getting too philosophical, when you mistake a well explained story for reality, you may be interpreting a fallacy. My core argument here, will lie on the very fact that humans have always found a way towards survival. Sounds overconfident, yes we may have an economic shock, but humans have always survived crisis, decades of wars and diseases. An AI crisis, even if it happens, should not be painted as one that is terminal to humans and the economy. History suggests that adaptation is likely, although the extent of impact varies. And I don’t think predicting the next crash, or predicting the next bubble, is particularly intellectually provoking here. While one should always prepare, predicting one without tangible signals and evidence is like throwing darts blindfolded. You might get one someday, someday..

The Research piece also singled out a few companies, namely AXP, Visa, Mastercard, Doordash.

On Visa and Mastercard, here are some thought provoking arguments: One of the points raised was that their entire business model was built with friction, and the friction can be removed once there are blockchain networks and agentic routes bypassing their payment rails. While this sounds plausible, the problem here is accountability; who is going to be accountable to the agents if there's fraudulent behaviour?

We have insurance companies, credit rating companies, auditing companies that have been around for years. They exist because someone is willing to pay a premium to offload the cost of uncertainty.

Similarly, blaming Visa, Mastercard, the banks, or the merchant if something goes wrong is possible, but unless the agents can guarantee zero fraud that humans can trust, then you don't have yet have a commercially viable product. Visa and Mastercard are no longer just commoditised "card networks", they are trust networks, rule makers and an identity layer.

A possible argument here would be compression of margin over time with the presence of viable alternatives. The key here is to weigh whether or not their VAS can make up for their potential margin compression. "Frictionless" alternatives have existed even before the blockchain - A2A transfer networks is an example. The narrative here may be a valid case of margin compression, not complete replacement, which the researchers here has tried to subtly paint.

We should not mistake a story for reality. Steve Eisman, one of the big shorts, is also long on the Mag 7s. This suggests that his positioning may be more nuanced than extreme bearish stories imply.

Note: Do note that this is an opinionated piece, make sure to do your own due diligence.