So familiar . Thanks Antowan for a great topic. Something about your writing astonishes me . How you mix the Scientific facts with the art of writing. Every time I read your work I feel the same. Humanities with Science. A great mix makes me enjoy the topic. Many thanks.
I asked Perplexity the following, and received the response that follows:
Q: there is a pattern: CEOs lay off many workers because they think AI will make their business "more efficient", then hire them back when they realize that people who know how to do things are necessary; generals buy many expensive complex weapons, then realize they have to improve the training of soldiers to win wars; leaders think they can run a country if businessmen support them, but they discover that workers are important too.. What does this say about the psychology of men in positions of power?"
Psychologically, these patterns point to a recurring bias in powerful people: they tend to treat others as interchangeable tools rather than as knowledgeable partners, then are forced by reality to rediscover their dependence on those very people.
Key traits of powerful decision‑makers
Instrumental view of people: Power makes it easier to see others in terms of their usefulness to a goal (cost, efficiency, votes) rather than as full humans with skills, limits, and needs. That instrumental mindset supports layoffs for “AI efficiency,” buying dazzling weapons, or courting business elites while neglecting workers.
Reduced perspective‑taking: Experiments show that priming people with power decreases their tendency and accuracy in understanding others’ thoughts and feelings. That makes it easier for a CEO or general to believe a clean spreadsheet or weapons brochure instead of listening to front‑line experience.
Overconfidence and distance from reality
Overconfidence in abstractions: Leaders with power often trust models, dashboards, and doctrines over messy human experience, until failures force them to adjust (rehiring workers, retraining soldiers, rebuilding social support). They lean on simplified stories: “AI replaces labor,” “technology wins wars,” “capital creates prosperity,” underestimating the complex systems those people actually run.
Psychological distance from consequences: Because they rarely bear the immediate personal cost of bad bets, powerful people can persist longer in mistaken strategies like over‑automation or over‑weaponization before reality becomes undeniable.
Dependence they don’t like to admit
Reluctant recognition of interdependence: The cycle you describe—discard people, then discover they’re indispensable—shows a clash between the fantasy of control and the fact of dependence on skilled, motivated humans. Power tempts leaders to imagine they stand above the system, but crises remind them they are embedded in it and need the same workers and soldiers they tried to replace or ignore.
Status bias toward elites: Psychologically, many leaders overweight the perspectives of those who resemble them in status (other executives, wealthy backers, technologists) and underweight those of lower‑status groups (workers, enlisted troops, marginalized citizens), even when the latter hold critical practical knowledge.
What this pattern suggests
At a deep level, these patterns suggest that many men in positions of power struggle with empathy, humility, and acknowledgment of mutual reliance, and default instead to control, abstraction, and prestige alliances.
The repeated need to “walk back” grand efficiency or technology schemes shows that human knowledge, judgment, and morale are not just nice extras but the core infrastructure that power keeps trying—and failing—to replace.
Yes. What I want to get at is that this is not entirely a "we have awful leaders" problem -- this is something that constantly comes up because the incentive structure for people to become leaders encourages people who have these characteristics. Unless and until we can create leadership programs that do not emphasize "steering the ship" and telling people what to do -- which is to say programs that emphasize domination instead of helping and problem solving -- we will have the same problems over and over and over.
Jadrian, we just recorded this week's podcast and we referenced you twice because of your comments. First, thanks for the comments which add value to our discussion. Second, be on the look out for the podcast!
Also very true. I used the Austrians as an example because this is a big part of their business cycle model. I am also not sure how much of the audience knew much about the Austrians views. I think there was space to mention them both
Near as I can tell, the economist whose models best fit our highly financialized economies is Minsky.
And while the phrase "Minsky moment" has been said by various financial pundits since 2008, his Financial Instability Hypothesis, of which "Minsky moments" is but a short part of longer cycles, is almost unknown.
I recommend teaching Minsky. I believe more widespread knowledge of the FIH would benefit everyone.
If the gold standard rules were still in effect, it would make sense to teach/promote Austrian models. But they're not.
Plenty of behaviors we saw during the Pandemic expose we still don't have a good grasp of a demand curve. Peleton is a good example of a company that over-invested in production without ever taking the pricing model into true consideration. That initial surge was replaced by complementary products or people eventually returning to established habits.
I'm a huge fan of the video games series "Age Of Empires" which relies on an AI playing the role of other players. It's a basic machine learning construct built out from 1952 when they first programmed a computer to play checkers.
AI is just a stochastic parrot at this stage, incapable in reasoning, just recitation of information. AGI isn't around the corner and automation is only good for repetitive tasks which still receive human verification.
Couldn’t agree more when you say the work still needs labor to get done. AI is only as good as the people giving it inputs. It can be a valuable tool, sure, but most use cases still need a skilled person with knowledge of whatever their niche is to get the most out of it.
Very interesting piece. Some time ago I wrote about layoffs and the research on it. Interestingly 'defensive' layoffs led to worse stock performance and worse company performance. This aligns with the malinvestment thesis.
So familiar . Thanks Antowan for a great topic. Something about your writing astonishes me . How you mix the Scientific facts with the art of writing. Every time I read your work I feel the same. Humanities with Science. A great mix makes me enjoy the topic. Many thanks.
Im glad you liked it. I am big fan of the classics. The humanities and sciences made me the man i am today! Thank you reading!
I asked Perplexity the following, and received the response that follows:
Q: there is a pattern: CEOs lay off many workers because they think AI will make their business "more efficient", then hire them back when they realize that people who know how to do things are necessary; generals buy many expensive complex weapons, then realize they have to improve the training of soldiers to win wars; leaders think they can run a country if businessmen support them, but they discover that workers are important too.. What does this say about the psychology of men in positions of power?"
Psychologically, these patterns point to a recurring bias in powerful people: they tend to treat others as interchangeable tools rather than as knowledgeable partners, then are forced by reality to rediscover their dependence on those very people.
Key traits of powerful decision‑makers
Instrumental view of people: Power makes it easier to see others in terms of their usefulness to a goal (cost, efficiency, votes) rather than as full humans with skills, limits, and needs. That instrumental mindset supports layoffs for “AI efficiency,” buying dazzling weapons, or courting business elites while neglecting workers.
Reduced perspective‑taking: Experiments show that priming people with power decreases their tendency and accuracy in understanding others’ thoughts and feelings. That makes it easier for a CEO or general to believe a clean spreadsheet or weapons brochure instead of listening to front‑line experience.
Overconfidence and distance from reality
Overconfidence in abstractions: Leaders with power often trust models, dashboards, and doctrines over messy human experience, until failures force them to adjust (rehiring workers, retraining soldiers, rebuilding social support). They lean on simplified stories: “AI replaces labor,” “technology wins wars,” “capital creates prosperity,” underestimating the complex systems those people actually run.
Psychological distance from consequences: Because they rarely bear the immediate personal cost of bad bets, powerful people can persist longer in mistaken strategies like over‑automation or over‑weaponization before reality becomes undeniable.
Dependence they don’t like to admit
Reluctant recognition of interdependence: The cycle you describe—discard people, then discover they’re indispensable—shows a clash between the fantasy of control and the fact of dependence on skilled, motivated humans. Power tempts leaders to imagine they stand above the system, but crises remind them they are embedded in it and need the same workers and soldiers they tried to replace or ignore.
Status bias toward elites: Psychologically, many leaders overweight the perspectives of those who resemble them in status (other executives, wealthy backers, technologists) and underweight those of lower‑status groups (workers, enlisted troops, marginalized citizens), even when the latter hold critical practical knowledge.
What this pattern suggests
At a deep level, these patterns suggest that many men in positions of power struggle with empathy, humility, and acknowledgment of mutual reliance, and default instead to control, abstraction, and prestige alliances.
The repeated need to “walk back” grand efficiency or technology schemes shows that human knowledge, judgment, and morale are not just nice extras but the core infrastructure that power keeps trying—and failing—to replace.
You last paragraph hits the hardest. These decisions are costly and have the capacity for real harm.
Yes. What I want to get at is that this is not entirely a "we have awful leaders" problem -- this is something that constantly comes up because the incentive structure for people to become leaders encourages people who have these characteristics. Unless and until we can create leadership programs that do not emphasize "steering the ship" and telling people what to do -- which is to say programs that emphasize domination instead of helping and problem solving -- we will have the same problems over and over and over.
I hadn't heard of the concept of malinvestments before. Thank you for writing this one up!
Jadrian, we just recorded this week's podcast and we referenced you twice because of your comments. First, thanks for the comments which add value to our discussion. Second, be on the look out for the podcast!
😬😬😬
Glad you like it. I dont subscribe any economic school but I learn from the good parts of all of them.
"The Austrian economists understood something important: artificial booms create artificial investments.".
To be fair, Keynes and Minsky wrote of this too, and I suspect they will never be suspected of being Austrian economists.
Also very true. I used the Austrians as an example because this is a big part of their business cycle model. I am also not sure how much of the audience knew much about the Austrians views. I think there was space to mention them both
Near as I can tell, the economist whose models best fit our highly financialized economies is Minsky.
And while the phrase "Minsky moment" has been said by various financial pundits since 2008, his Financial Instability Hypothesis, of which "Minsky moments" is but a short part of longer cycles, is almost unknown.
I recommend teaching Minsky. I believe more widespread knowledge of the FIH would benefit everyone.
If the gold standard rules were still in effect, it would make sense to teach/promote Austrian models. But they're not.
Plenty of behaviors we saw during the Pandemic expose we still don't have a good grasp of a demand curve. Peleton is a good example of a company that over-invested in production without ever taking the pricing model into true consideration. That initial surge was replaced by complementary products or people eventually returning to established habits.
I'm a huge fan of the video games series "Age Of Empires" which relies on an AI playing the role of other players. It's a basic machine learning construct built out from 1952 when they first programmed a computer to play checkers.
AI is just a stochastic parrot at this stage, incapable in reasoning, just recitation of information. AGI isn't around the corner and automation is only good for repetitive tasks which still receive human verification.
*But I do love a good von Mises reference!
I agree on every front. Im a AOE fan as well. I also love Civ7 and EU5
Tempest Rising is my downtime timesink... EU5 is next. Only so much space on my gaming rig.
Couldn’t agree more when you say the work still needs labor to get done. AI is only as good as the people giving it inputs. It can be a valuable tool, sure, but most use cases still need a skilled person with knowledge of whatever their niche is to get the most out of it.
Exactly! AI is a tool not a replacement full stop.
Very interesting piece. Some time ago I wrote about layoffs and the research on it. Interestingly 'defensive' layoffs led to worse stock performance and worse company performance. This aligns with the malinvestment thesis.