Chance, or nature itself, scattered the planet’s gifts with casual generosity. Rivers, minerals, fertile soils and shifting climates were spread unevenly, inviting humanity to share and trade. Yet fear often drove communities to seek safety in self-sufficiency, and strength through expansion, and cooperation gave way to conquest. An unscripted experiment evolved according to human anxieties and ambition.

This brings us to a familiar question. What is the purpose of human life? Many now search for meaning, perhaps because the pressures of survival have eased. For most creatures, survival itself is purpose. Only when basic needs are met does the mind begin to wonder why it exists.

The purpose of our species may be as hidden from us as the function of a computer is to one of its transistors. A single component cannot grasp the design of the whole. Likewise, humans may be part of a larger pattern that no individual can fully perceive.

Perhaps our real purpose is simpler. Survival and happiness, while respecting the same pursuit in others. Where aims collide, societies create norms and agreements to facilitate coexistence.

This way, humanity becomes a vast network of individuals following their own local purposes, producing a collective direction that emerges on its own. Our task may not be to understand the entire design but to play our part with humility and curiosity.

Artificial intelligence will greatly enhance efficiency. It operates with speed and scale beyond human capacity, applying computational brute force to problems that would otherwise take eons to resolve. By running trillions of simulations and mapping vast outcome spaces, AI can assign probabilities and correlations with an objectivity and endurance that human cognition cannot match. From this capacity will emerge new materials, processes, business models, and solutions, not through inspiration, but through exhaustive exploration.

Yet one must not underestimate brute force. Though AI may accelerate discovery, it may also diminish diversity. By organizing and filtering information, it reduces informational entropy. In the short term, this produces clarity and coherence; over time, it risks narrowing the range of perspectives upon which collective intelligence depends.

History shows that concentration of information and resources often precedes systemic failure. The Soviet experiment in central planning collapsed because it could not allocate resources efficiently to meet basic needs. In contrast, contemporary capitalism skews in the opposite direction: inequality channels capital toward luxuries and passion projects while neglecting accessible necessities such as education, healthcare, eldercare, and environmental stability. Even when bias is unintentional, inequality degrades informational efficiency, the economy’s ability to use distributed knowledge to allocate resources optimally.

Before the internet, information transmission was slow and search costs were high. The internet improved access and speed; search engines improved precision. But each advance introduced a trade-off. As search efficiency increased, systems favoured convenience and speed over diversity and depth. Artificial intelligence represents a further acceleration of this substitution.

A large language model, such as a GPT, is a statistical system trained on immense corpora of human language to generate plausible, coherent responses. It excels at synthesis, but its very strength lies in averaging, producing the most likely continuation of thought. As AI systems become embedded in decision-making, their outputs become inputs for other agents, reinforcing consensus and compressing variance. The informational field becomes more ordered, but less exploratory.

This leads to an intriguing question: what is the entropy of an AI system?

Entropy analysis depends on how one defines the system’s boundaries. If we consider only the informational domain, excluding the physical infrastructure, AI appears to reduce entropy. It organizes data, filters noise, and imposes order. Yet, when viewed as a complete system, including data centers, networks, and power grids, the Second Law of Thermodynamics still applies: the total entropy of a closed system cannot decrease.

If information is inseparable from its physical substrate, if computation is physical, then reductions in informational entropy must be offset by increases in physical entropy. In other words, every increment of informational order produced by a GPT requires a corresponding increase in heat, energy consumption, and material disorder elsewhere. More order in information implies more chaos in energy.

This realization reframes the energy problem of AI as not merely technical, but thermodynamic. Solutions lie not only in renewable energy or cooling systems, but also in informational design — in how models compress, store, and recall data within their context windows. Efficient representation of knowledge directly reduces the physical entropy generated in maintaining it.

When quantum computing integrates with AI, these relationships will deepen. Concepts such as physical–informational equivalence and quantum thermodynamic entropy will shift from theory to engineering. Yet even quantum systems cannot transcend the fundamental constraints of energy, entropy, and information. The same principles that govern stars will govern algorithms.

There will be limits to what quantum-accelerated AI can achieve, limits that investors and engineers alike should acknowledge before the next wave of over-optimism.

The global investment industry has between US$200-300 trillion in assets. Impact investment has about US$1.5 trillion in assets, some 0.75% of total market. This is consistent with estimates of philanthropic capital of some US$ 1-2 trillion. Family offices have about 1-3% of the global market and about 4% of the impact market.

Most of our problems stem from a failure of economics. One of the most insidious effects is where the benefits of an action accrue to the few, or the one, while its costs accrue to the many. A fair and just distribution of wealth and income, a sustainable environment, these are all public goods that we know a market economy will undersupply. Absent regulation and policy, the private sector will never adequately supply them.

Asking a subset of the investment world to fund investments in public goods may work at a local scale but is bound to be inadequate at a global scale. Impact investing is unlikely to work unless public policy is also brough to bear. Blended finance can help but consider the dynamics of a CLO with a 0.75% equity tranche. The focused benefits distributed costs phenomenon is responsible for most of our failures, in providing a habitable and flourishing environment, and in creating an equitable economy. Asking impact capital to fund these public goods is asking them to fail at the aggregate level. There may be profitable opportunities at the micro level but if an impact investor were to diversify over all opportunities, they must almost surely fail.

What is required of us is a systemic change. This can come from policy and from cultural change. The two are often correlated. The 60:40 equity bond portfolio is a case in point. It has little theoretical basis, yet it is widely accepted and practiced. Why? Because it tends to work albeit inefficiently, but it is simple and intuitive and is backed by a narrative of plausibility and expert opinion.

Impact investment needs such a totem. We need to identify a theme that is practical, simple, that works, and that expert opinion and public policy can get behind. Blended finance is a strong candidate. The mechanics of it are fairly workable, it can generate higher returns for the equity and mezz investors but relies on equity investors being less demanding. What it needs is to be seen to work in practice for academia, experts, and public policy to support.

Family offices are tiny in the scheme of things. Yet they can be helpful in animating investment themes, such as private markets, and we hope, impact investing. However, from the numbers above, the task is daunting. We need to demonstrate success. We need to obtain impact and generate reasonable returns even if they are not optimal returns. Our example will be something others can build on who do not have the luxury of flexibility and the spirit of adventure. But it means we must be very selective. Recall that total diversification leads almost surely to bad outcomes when you are funding public goods.

We need public policy and academia behind us to develop our brand and concept. I would like to see more grants in this direction, to universities and to think tanks.

I give us a 1 in 5 chance of success in the next 10 years. We cannot let futility get in the way of our efforts. Without us, the chances are zero.

A hundred years of capitalism has brought us here. What is here?

• High income and wealth inequality.
• Ageing populations. High dependency ratios.
• Disenchantment with governments. Perception that capitalism and liberal democracy have failed to increase standards of living.
• High and rising public debt.
• Slow economic growth.
• High asset growth.
• Falling interest rates.
• Rising global temperatures and climate volatility.

What capitalism and liberal democracy were supposed to do for us.

• Capitalism encourages economic efficiency and growth.
• Growth leads to the embracing of liberal democracy.

Side effects.

• Capitalism leads to wealth accumulation and concentration.
• Suppliers of labour lag owners of capital as the economy becomes increasingly driven by knowledge.
• Inequality results and accumulates.
• Inequality

  • Results in over saving and insufficient velocity of circulation of money.
  • Is disinflationary and leads to sub-par growth.
  • Results in inefficient allocation of resources.

• Over-saving leads to lower interest rates which encourages over-borrowing.

Fragilities

Inequality can be tolerated until or unless:

• Inflation rises.
• Cost of living rises.
• States fail to provide public goods as promised.
• Social media enables and encourages comparisons.
• Populists leverage inequality to instigate political and social change.

Interest rates can remain low until or unless:

• Public debt levels rise above certain thresholds.
• Inflation rises and holds above certain thresholds.
• Central banks are unable to monetize public debt.
• Savings rates fall.
• There is a loss of confidence in the state.

Sovereign bond markets can remain well behaved until and unless:

• There is a loss of confidence in a government.
• Hyperinflation occurs, which is often a consequence of a loss of confidence.
• Inflation rises due to a supply shock.
• A small subset of countries’ national debt surges out of control. If large numbers of countries grow their national debt it may not trigger a run on their markets.

Where do we go from here?

1. Stagnation and drift.

• Economy: Growth remains low, productivity improvements are incremental, and debt ratios rise gradually. Asset prices stay elevated but fragile.
• Society: Inequality persists; social tensions simmer but don’t break the system. Governments provide just enough support (subsidies, transfers) to prevent collapse but not enough to renew prosperity.
• Politics: Populism and polarization remain chronic but contained, with alternating swings in policy but no systemic overhaul.
• Risk: The system doesn’t “fail” outright, but the long malaise breeds cynicism and erodes confidence in institutions over decades.
• This environment is not sustainable and is more of a transitory phase.

2. Populist disruption

• Economy: Protectionism, trade wars, and industrial policy dominate. This raises costs and inflation but creates short-term jobs in “reshored” sectors.
• Society: Populist leaders exploit inequality and cultural divides. Redistribution schemes or national projects (infrastructure, military) become more common.
• Politics: Liberal democracy weakens as strongmen centralize power, claiming to represent “the people.”
• Risk: Institutions erode, capital flees, sovereign debt markets destabilize. Long-term prosperity suffers, though some groups may feel temporarily empowered.
• This state of the world is unlikely to be sustainable and likely deteriorates into anarchy as populist governments become another failed promise.

3. Crisis-Driven Reset

• Trigger: A major event—climate disaster, financial crash, sovereign debt crisis, or prolonged inflation shock.
• Response: The crisis forces radical policy shifts: debt restructuring, aggressive wealth taxes, universal basic income, or large-scale climate transition spending.
• Economy: Painful adjustment initially, but if reform is well-designed, could lay foundations for a more balanced system.
• Politics: Higher risk of instability in the short run; potential renewal of democratic legitimacy if reforms succeed.
• Risk: Poorly managed resets can spiral into authoritarianism or depression.
• This stage usually precedes a more stable equilibrium. It can, however, be protracted, but in the optimistic case, the acute hardship experienced during this phase seeds the beginnings of a new and sustainable system.

4. Technological and Green Renewal

• Economy: AI, biotech, clean energy, and climate adaptation spark a new productivity wave, lowering costs and creating new industries.
• Society: If gains are shared broadly (through taxation, public investment, or stronger labor bargaining), inequality narrows and living standards improve.
• Politics: Liberal democracy regains legitimacy as it demonstrates the ability to deliver rising prosperity and tackle climate risks.
• Risk: If gains concentrate (as with past tech waves), this path collapses back into scenario 1 or 2.

5. Systemic Breakdown

• Economy: Debt crises, runaway inflation, or climate collapse overwhelm existing institutions.
• Society: Mass unrest, migration crises, and breakdown of social order in vulnerable regions.
• Politics: Liberal democracy retreats sharply, replaced by authoritarianism, fragmented blocs, or even failed states.
• Risk: Global cooperation collapses, amplifying climate and security risks. This is the darkest path, but history shows it cannot be ruled out.
• This stage usually precedes a more stable equilibrium. It can, however, be protracted, but in the optimistic case, the acute hardship experienced during this phase seeds the beginnings of a new and sustainable system.

Prescriptions:

1. Immediate policy actions:

• Inflation and cost of living are major pain points and deserve vigilance.

  • Maintain the independence of central banks.
  • Improve policy models to address efficacy of rates or FX policy tools.
  • Go beyond inflation targeting to managing cost of living; this requires central banks not only to manage price rates of change but price levels as well.
  • Social welfare programs to mitigate the rising costs of living. This will likely be expensive.

• Public debt has far-reaching implications and deserves active management.

  • Re-specify the mandate of treasuries to include not just funding government but managing lifetime funding costs. This is the easy bit.
  • Maintain a realistic and practical budget. This is wide ranging and includes defence, social security and welfare, education, and healthcare. The provision of public goods needs redefinition and reform as the basis of reviewing funding systems and levels.

• The financial system is a source for policy transmission as well as contagion and needs careful management.

  • Bolster bank capital rules and not roll them back.
  • Extend regulation beyond banks to include all systemic financial intermediaries (and possibly principals) such as private equity and private credit, securitisation markets, structured credit markets and the insurance industry.

• Politics.

  • This is possibly the most intractable of all the pillars that need reform. How does a country remain true to the ideals of liberal democracy as the far right gains the popular vote?
  • Balance between freedom and control. Without appropriate controls, the agents of freedom such as the press, the courts, and social media can be co-opted by interest groups to the detriment of freedom. Freedom needs tending to. Freedom, ironically, requires some control.
  • Back to basics. Foundational principles of morality and justice need to be upheld.
  • Good governance. This requires: no concentration of power, checks and balances, term limits, accountability, transparency and rule of law.

2. Reforming the Economy and Society

• Changing mindsets: Self interest is ingrained in human instinct. To balance instinct, humans need to be guided by a set of principles to harness those instincts and to manage them when they are unleashed.

  • Education. Changing mindsets has to happen at an early age as part of the early education curriculum.
  • Diversity, Inclusion and Tolerance.
  • Analysis likes diversity of data, information, interpretations and opinions.
  • Scientific method, logic and rationality. Superstition impedes rational thought, development and progress. Rationality and scientific method help with analysis, information processing and decision making in the resource allocation process.
  • Can and should morality be taught? Unsure.

• Policy principles:

• General liberty clause

All acts are permitted unless they wrongfully impair another’s equal authority or impose significant, non-consensual risk thereof. Restrictions must be necessary and least-restrictive.

• Risk threshold clause

Regulators shall set and publish domain-specific thresholds T for expected harm or credible worst-case; under deep uncertainty, choose conservative T, review at fixed intervals.

• Aggregation clause

Otherwise-harmless acts may be limited when a predictable aggregation breaches T; interventions shall target the aggregate (caps, prices) rather than prescribe individual behaviour, where feasible.

• Consent quality clause

Consent is valid only if informed, uncoerced, and reasonably avoidable; where asymmetries preclude this, processors owe fiduciary duties and purpose limits.

• Scarcity allocation clause

Scarce commons shall be allocated by auction/lottery with equal per-capita distribution of proceeds; targeted, time-bounded rectification applies where prior violations are identified.

• Sunset & audit clause

Any rule that restricts baseline authority expires after N years unless re-justified against T with a published necessity review and independent audit.

• Politics

The government systems most compatible with the above system of principles is, in order of compatibility:

• Constitutional parliamentary democracy.
• Constitutional federal democracy.
• Constitutional presidential majoritarian.

Other systems such as Technocracy, Theocracy, Monarchy, and Command Economies do not fit the above principles well.

Government shall provide public goods, of which the system above is an example. This principle will guide the scope of government authority.

Over the past century, capitalism and liberal democracy have defined the global economic and political order. Together, they promised efficiency, prosperity, and freedom. They were expected to reinforce one another: capitalism would drive growth, and growth would nurture democracy. For much of the twentieth century, this vision seemed to hold.

Yet today we find ourselves in a very different place. Despite immense technological advances and unprecedented global wealth, the system shows deep fractures. Rising inequality, political disenchantment, slow growth, and environmental strain have become defining features of the present. To understand our moment, we must confront not only the achievements of capitalism and democracy, but also their side effects and fragilities.

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Where We Are Now

After a century of capitalism, the global economy and society exhibit a paradoxical mix of prosperity and precarity:

• High income and wealth inequality, echoing Piketty’s observation that returns on capital (r) outpace economic growth (g), concentrating wealth in fewer hands.
• Ageing populations and high dependency ratios in advanced economies, creating pressure on public finances and social safety nets.
• Disenchantment with governments, in line with Rodrik’s thesis that globalization has outpaced the capacity of national democracies to deliver.
• High and rising public debt, as states borrow heavily to sustain growth, cushion crises, and meet welfare commitments.
• Sluggish economic growth.
• High asset growth, enriching capital holders while leaving wage earners behind.
• Persistently falling interest rates, a symptom of what Larry Summers has termed “secular stagnation.”
• Rising global temperatures and climate volatility.

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The Promise of Capitalism and Liberal Democracy

Capitalism was built on the principle of allocative efficiency: markets reward innovation, discipline inefficiency, and maximize growth. Joseph Schumpeter famously described this as creative destruction, the process by which innovation drives long-run prosperity. Liberal democracy, in turn, was expected to flourish under prosperity. Rising incomes would generate a broad middle class, the supposed foundation of stable democratic societies.

For decades, this model appeared successful. Postwar growth lifted millions out of poverty, rebuilt war-torn economies, and spread democratic institutions. Capitalism and liberal democracy reinforced each other, producing stability and dynamism.

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The Side Effects of Success

Yet the very mechanisms that fueled growth also generated imbalances:

• Concentration of wealth: As Piketty argues, when capital returns exceed growth, wealth inevitably accumulates faster than wages.
• Erosion of labour’s share: With globalization and automation, labour increasingly loses bargaining power, a trend foreshadowed by Marx’s prediction of capital’s dominance over wage labour.
• Persistent inequality: Across generations, unequal gains compound.
• Over-saving and under-consumption: Keynes noted that excessive saving by the wealthy can lead to a paradox of thrift, depressing aggregate demand.
• Disinflation and stagnation: Inequality itself becomes a drag on growth, locking economies into sub-par performance.
• Misallocation of resources: Abundant savings chase speculative returns, inflating asset bubbles rather than funding productive investment.
• Falling interest rates and rising debt: To compensate for weak demand, states and households borrow more, deepening dependence on cheap credit.

These side effects are not incidental. They are intrinsic to the dynamics of capitalism in its current form, where returns to knowledge and capital systematically outpace returns to labour.

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Fragilities in the System

The contradictions of capitalism and liberal democracy are tolerable — until they are not. Several pressure points reveal the fragility beneath the surface.

Inequality can be sustained until:

• Inflation and living costs rise enough to expose disparities (a recurring theme in Polanyi’s Great Transformation).
• States visibly fail to deliver promised public goods.
• Social media amplifies resentment through constant comparison, magnifying the visibility of inequality.
• Populist leaders harness discontent, as described in recent political economy analyses of democratic backsliding.

Low interest rates are sustainable until:

• Public debt exceeds credible thresholds of repayment.
• Inflation becomes entrenched above central bank targets.
• Central banks lose credibility in their ability to monetize debt.
• Demographic shifts reduce savings, reversing the long decline in rates.
• Investors lose confidence in the fiscal capacity of states.

Sovereign bond markets remain calm until:

• Confidence in government solvency falters.
• Hyperinflation emerges, often triggered by a loss of trust in the state.
• Severe supply shocks ignite sustained inflation.
• A subset of countries’ debts spiral out of control, though systemic crises typically require broader distress.

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Conclusion

A hundred years of capitalism has brought both extraordinary prosperity and deep systemic tension. The same system that raised living standards and spread democracy now generates inequality, stagnation, and disillusionment. Its fragilities are not abstract: they reveal themselves when inflation bites, when governments overpromise and underdeliver, and when trust in institutions erodes.

Capitalism and liberal democracy have not failed outright, but they are failing to adapt. Without rebalancing — through policies that spread knowledge, broaden opportunity, and address externalities like climate change — the system’s contradictions threaten its own survival.

Markets left unmoored from society’s needs will eventually provoke backlash. Unchecked inequality depresses demand and undermines growth. Capital’s logic tends toward concentration unless restrained.

The question is not whether capitalism can generate wealth. It is whether capitalism and liberal democracy, as currently structured, can sustain legitimacy in the face of their side effects. The answer will determine whether the next hundred years bring renewal — or rupture.