This is how an economy actually works
(twitter.com)
Comments (16)
sorted by:
Alright, here we go, the full English version, both threads. First thread: Elon Musk once said something that really stuck with me about resource allocation. In essence: beyond a certain level of wealth, money is no longer about consumption—it's about capital allocation. That sentence changes everything. At its core, economics is just an allocation problem. You have finite resources and infinite possible uses. Who decides where things go? Imagine a school playground. 100 kids, Pokémon card packs handed out randomly. You let them play freely. Very quickly, order emerges. The good players accumulate the rare cards, the collectors sort them, the negotiators make deals. No one planned it. Yet every card ends up in the hands of the person who values it most. The system maximizes total happiness across the playground. That's the invisible hand. Now bring in the teacher. She thinks it's unfair. Léo has 50 cards, Tom has 3. She confiscates them, redistributes, and imposes equality. Three immediate effects: The good players stop trying—what's the point? The weak players have no reason to improve, since they'll get their share anyway. Trading collapses. The playground is now equal... and dead. She maximized equality and destroyed happiness. The teacher's problem is that she cannot possibly have the information that the playground collectively had. This is Mises' economic calculation problem, formulated in 1920. The USSR tried to solve it for 70 years with the Gosplan. Result: shortages, lines, collapse. Not because the Soviets were stupid, but because the problem is mathematically insoluble under central planning. When Musk has 200 billion, he doesn't consume it—he allocates it: SpaceX, Starlink, Neuralink, xAI. Every dollar is a bet on the future. And he has a track record: PayPal, Tesla, SpaceX. He has proven he knows how to identify massive problems and allocate resources with spectacular returns. The State also has a track record: collapsing hospitals, declining education, exploding debt, public services that degrade despite constantly rising budgets. The market identifies good allocators. Politics identifies good communicators. Profit is not an end in itself—it's a signal. It says: you have allocated scarce resources toward a use that people value enough to pay for. The bigger the profit, the greater the value created. When Starlink is profitable, it means millions of people in rural areas finally have internet. When a government ministry runs a deficit, it means it's consuming more than it produces. One creates, the other destroys—and we call that "redistribution." In our societies, there are two types of actors: entrepreneurs and bureaucrats. The entrepreneur takes personal risk to identify a problem, mobilize resources, and create a solution. If he's wrong, he loses. If he's right, his customers win, his employees win, his suppliers win, and the State collects taxes. He is the basic unit of human progress. The bureaucrat takes no personal risk. His salary is guaranteed. At best, he maintains an existing rent. At worst, he destroys it through excessive regulation, forced misallocation, and perverse incentives that discourage producers. But in no case does he create. Look at the last 50 years. iPhone, civilian internet, SpaceX, Tesla, Google, Amazon, Stripe, mRNA, ChatGPT. All private inventions, carried by entrepreneurs, funded by venture capital. Not a single ministry has invented anything that changed your daily life. France has become the world's laboratory for bureaucratic drift. 57% of GDP in public spending—an absolute record. A tentacular administration, a tax system that penalizes wealth creation. Result: falling behind the United States, Germany, Switzerland. Brain drain. Deindustrialization. Exploding debt. And the worst part is that bad allocation reinforces itself. The more the State takes, the less entrepreneurs create. The less they create, the smaller the tax base. The more the State borrows and taxes. A perfect negative feedback loop. The teacher thinks she's helping, and every year the playground produces less. In our societies, it is always entrepreneurs who advance civilization. Bureaucrats at best maintain a rent; at worst, they destroy it. No society has ever progressed by taxing its creators to subsidize its managers. The question is never "who has how much." It's who allocates the next unit of resource best to maximize humanity's future. The answer over the past 200 years has never changed. It is not the civil servants. Second thread: Now let's talk about inflation. The teacher has noticed that the kids are unhappy with her redistribution. So she prints more Pokémon card packs. Lots more. She hands them out to everyone so that everyone feels richer. "Look, now Tom has 10 packs instead of 3!" But the total number of rare cards hasn't changed. The playground is still the same size. The only thing that's changed is the number of packs. Suddenly, a Charizard that was worth 50 packs now costs 500. Everyone needs more packs to get the same card. The teacher congratulates herself: "See, I gave everyone more cards!" But she doesn't understand that she just devalued the currency. The kids who had saved their packs see their savings melt away. The ones who spent everything are rewarded. Saving is punished, spending is encouraged. This is exactly what central banks do with money printing. They call it stimulus, but it's really just hidden taxation through inflation.
Above translation, but with spaces!
Elon Musk said something about resource allocation that really stuck with me.
Essentially:
Beyond a certain level of wealth, money is no longer for consumption, it's for capital allocation. That statement changes everything. Economics, at its core, is simply a matter of allocation. You have finite resources and infinite uses. Who decides where what goes?
Imagine a school playground. 100 children, packs of Pokémon cards distributed randomly. You let things play out.
Very quickly, an order emerges. The good players accumulate rare cards, the collectors sort them, the negotiators find deals. No one planned it. And yet, every card ends up in the hands of the one who gets the most value from it. The system maximizes the overall happiness of the playground. That's the invisible hand.
Now bring in the teacher. She finds it unfair. Leo has 50 cards, Tom has 3. She confiscates, redistributes, and enforces equality. Three immediate effects. Good players stop playing; what's the point? Bad players no longer have any reason to improve; they'll get their share. Trading collapses.
The court is equal, and dead. It maximized equality, it destroyed happiness. The mistress's problem is that she can't have the information the court collectively possessed.
This is the problem of Mises's economic calculus, formulated in 1920.
The USSR tried to solve it for 70 years with Gosplan.
The result:
Shortages, queues, collapse. Not because the Soviets were stupid, but because the problem is mathematically unsolvable in a centralized mode.
When Musk has $200 billion, he doesn't spend it, he allocates it. SpaceX, Starlink, Neuralink, xAI. Every dollar is a bet on the future. And he has a track record. PayPal, Tesla, and SpaceX. He has demonstrated that he knows how to identify immense problems and allocate resources to them with spectacular returns.
The state also has a track record. Hospitals are collapsing, education is declining, debt is exploding, and public services are deteriorating despite constantly increasing budgets.
The market identifies the good allocators, politics identifies the good communicators. Profit is not an end in itself, it's a signal.
It says:
You have allocated scarce resources to a use that people value enough to pay for. The greater the profit, the greater the value creation.
When Starlink is profitable, it means that millions of people in rural areas finally have internet access.
When a ministry is in deficit, it means that it consumes more than it produces. One creates, the other destroys, and we call that redistribution.
In our societies, there are two categories of actors: Entrepreneurs and Bureaucrats.
The ENTREPRENEUR takes a personal risk to identify a problem, mobilize resources, and create a solution. If he's wrong, he loses. If he's right, his clients win, his employees win, his suppliers win, and the state collects taxes. He is the basic unit of human progress.
The BUREAUCRAT takes no personal risk. His salary is guaranteed. At best, he maintains an existing privilege. At worst, he destroys it through excessive regulation, flawed forced allocation, and perverse incentives that discourage those who produce.
But in no case does he create anything. Look at the last 50 years. iPhone, public internet, SpaceX, Tesla, Google, Amazon, Stripe, mRNA, ChatGPT.
All private inventions, driven by entrepreneurs, financed by venture capital. Not a single ministry has invented anything that has changed your daily life. France has become the world's laboratory for bureaucratic drift. 57% of GDP in public spending, an absolute record. A sprawling administration, a tax system that penalizes wealth creation.
The result:
Falling behind the United States, Germany, and Switzerland. Brain drain. Deindustrialization. Exploding debt.
And the worst part is that this misallocation is self-reinforcing. The more the government collects, the less entrepreneurs create. The less they create, the smaller the tax base. The more the government borrows and taxes. A perfect negative feedback loop. The teacher thinks she's helping, but every year the school produces less.
In our societies, it is always the Entrepreneurs who drive civilization forward.
Bureaucrats, at best, maintain a privileged position; at worst, destroy it.
No society has ever progressed by taxing its creators to subsidize its managers. The question is never who has what. It's who best allocates the next unit of resource to maximize humanity's future. The answer has never changed in 200 years. It's not the civil servants.
Hey careful with those spaces buddy. Carriage-return / Linefeed characters dont grow on trees you know. Save the polar bears lol.
Very legible, thank you.
wish i had more upvotes to give
Thank you casuallyobservant! That was casually observant. 😁
ABSOLUTEDLY BRILLIANT!! I always STRIVE to find messaging that says a LOT with FEWER words.!!! This DELIVERS!!!
I like the contrast between the track record of allocation by Elon Musk versus the track record of allocation by the state ( governments in general)
When Musk has 200 billion, he doesn't consume it—he allocates it: SpaceX, Starlink, Neuralink, xAI. Every dollar is a bet on the future. And he has a track record: PayPal, Tesla, SpaceX. He has proven he knows how to identify massive problems and allocate resources with spectacular returns.
vs.
The State also has a track record: collapsing hospitals, declining education, exploding debt, public services that degrade despite constantly rising budgets.
The playground is now equal... and dead....
Yeah .... That's authority for you. And, here nobility should enter, not force based on falsehoods. It reminded by of Ecclesiastics 9
Hence the next title: Wisdom better than Power.
Good article.
One amend:
Half of this list wouldn’t grow that fast without a massive government investment at the very early stage.
Without these government subsidies some other entrepreneurs would be successful and this list would look differently today, e.g. myPhone, FineInternet, SpaceGuru, Lambda, Joogle, Forester, PatchPay, MadJab, DigiChat.
This doesn’t negate the main point the author is making. Exactly the opposite: it confirms the point.
What happens when resources are not finite? Why did God promise abundance? Most of the "global economy" is about creating artificial scarcity
excellent thought! applies really well when comparing times when people follow godly principles versus going after “other”
And this is why government programs are basically graft disguised as altruism, and why socialism works about as well as a hammer does to julienne potatoes.
This view is still in the mindset of "scarcity" and doesn't yet take into account the role of robots & ai, which could essentially make the cost of goods & services drop to pennies. This would allow to create higher incomes without devaluating the currency.
I would be fully onboard with a truly free, capitalistic society, but only if there was consideration for people who want to opt out. There is no practical way for people to live freely off the land unless they were fortunate enough to have been born on North Sentinel Island..
Good thoughts. But where was this 10, 20, or 30 years ago?
Government is a leach. Just to sum it up.