---
type: claim
domain: internet-finance
description: "Markets serve three functions: store of value, unit of account, intermediary of exchange. AI with ubiquitous real-time data could theoretically perform all three, bypassing market price discovery entirely — the most radical implication of AI for internet finance"
confidence: speculative
source: "Schmachtenberger on Great Simplification #132 (Nate Hagens, 2025)"
created: 2026-04-03
related:
  - "the price of anarchy quantifies the gap between cooperative optimum and competitive equilibrium and applying this framework to civilizational coordination failures offers a quantitative lens though operationalizing it at scale remains unproven"
  - "agentic Taylorism means humanity feeds knowledge into AI through usage as a byproduct of labor and whether this concentrates or distributes depends entirely on engineering and evaluation"
---

# AI with ubiquitous sensors could theoretically perform the three core functions of financial markets rendering traditional finance infrastructure obsolete

Schmachtenberger raises a radical possibility: financial markets exist because no single agent has enough information to allocate resources efficiently. Markets aggregate distributed information through price signals. But AI with access to ubiquitous sensor data (supply chains, consumption patterns, resource availability, production capacity) could theoretically perform this aggregation function directly — without the distortions of speculation, manipulation, and information asymmetry that plague market-based price discovery.

The three core functions:

1. **Store of value** — AI could track real asset states (physical infrastructure, human capital, natural capital, knowledge capital) in real time rather than through financial proxies (stocks, bonds, currencies) that diverge from underlying value.

2. **Unit of account** — AI could compute multi-dimensional value metrics rather than reducing everything to a single currency denomination. A loaf of bread's "value" includes its caloric content, ecological footprint, labor inputs, supply chain resilience, and nutritional quality — all of which AI could track simultaneously.

3. **Intermediary of exchange** — AI could match production to need directly, optimizing logistics and allocation without market intermediation. This is essentially the "calculation problem" that Hayek argued markets solve better than central planning — but with information technology that Hayek couldn't have imagined.

**Why this matters for internet finance:** If AI can perform market functions more efficiently than markets, then the entire internet finance thesis — decision markets, futarchy, tokenized governance — may be building infrastructure for a transitional phase rather than an endpoint. The ultimate coordination mechanism may not be markets at all but direct computational allocation.

**Why this is speculative:** Hayek's calculation problem wasn't just about information quantity — it was about information that exists only in local contexts (tacit knowledge, preferences, situational judgment) and can't be centrally aggregated without distortion. Whether AI can capture tacit knowledge or whether it will always require market-like mechanisms to surface distributed information is an open empirical question. Current AI systems are far from the ubiquitous sensor + real-time allocation capability this scenario requires.

**The governance question:** If AI replaces finance, who controls the AI? The same concentration-vs-distribution fork from Agentic Taylorism applies. Centralized AI allocation is command economy with better computers — exactly the system Hayek argued against. Distributed AI allocation requires coordination mechanisms that look a lot like... markets. The endpoint may loop back to market-like structures implemented in AI rather than replacing markets entirely.

## Challenges

- Hayek's critique of central planning was not primarily about computational capacity but about the nature of knowledge itself — local, contextual, tacit, and revealed only through action. AI may increase computational capacity by orders of magnitude without solving the fundamental knowledge problem.
- Financial markets serve functions beyond information aggregation: risk transfer, intertemporal allocation, incentive alignment. AI would need to replicate all of these, not just price discovery.
- The scenario requires a level of sensor ubiquity and AI capability that is far beyond current technology. This is a thought experiment about theoretical limits, not a near-term possibility.
- "Who controls the AI" is not a secondary question — it IS the question. Without a governance answer, this scenario is either utopian (benevolent omniscient planner) or dystopian (authoritarian computational control).

---

Relevant Notes:
- [[agentic Taylorism means humanity feeds knowledge into AI through usage as a byproduct of labor and whether this concentrates or distributes depends entirely on engineering and evaluation]] — the concentration/distribution fork applies to AI-as-finance just as it does to AI-as-knowledge-extraction
- [[the price of anarchy quantifies the gap between cooperative optimum and competitive equilibrium and applying this framework to civilizational coordination failures offers a quantitative lens though operationalizing it at scale remains unproven]] — if AI can close the gap between competitive equilibrium and cooperative optimum directly, the PoA framework measures exactly what AI-finance would eliminate

Topics:
- [[_map]]
