The Cantillon Effect
A Hidden in Plain Sight force shaping the world ...
The Cantillon Effect is named after Richard Cantillon, an 18th-century economist who noticed that when new money is created, it doesn’t spread evenly through the economy.
Instead, those closest to the source of the new money (central governments, financial institutions and asset-holders) get to use it first, before prices rise.
By the time it trickles down to everyone else, prices have already gone up, so the latecomers get less bang for their buck.
Imagine a pizza delivery. Your teenage bro-ski brother snags the biggest, hottest slices - the side with all the pepperoni. By the time the box gets to you - the runt of the family - all that’s left is the crust. Your more powerful bro was closer to the source and therefore took his share first, leaving you with less premium slices.
Money is a technology.
AI is a technology.
The wheel, the printing press, the Internet: same story.
The people who get access first, or who are proactive enough to adopt early, reap outsized rewards. This is what I’ll dub the Cantillon Effect of Technology.
Early AI adopters (startups, tech giants, savvy individuals) are already automating tasks, creating new products, and capturing market share.
Just like “retail” had a huge “front-running opportunity” vs. institutions with regards to bitcoin, curious individuals can front-run Corporate America by making the meaning they want to inculcate in the world.
“Easy wins” are still available in relation to both money & AI but the retail-front-running-competitive-advantage is shrinking on a daily basis.
The gap between early adopters and laggards widens, just like with money.
The real inequality isn’t just about money or “the rich getting richer.”
It’s about proximity to innovation.
The first-movers set the rules, capture the value, and shape the future. Everyone else plays catch-up.
It’s about being in the right place at the right time. Inequality is a natural outcome of any system where new resources (money, tech, information) are distributed unevenly.
As he is with so many things, Dave Chappelle was ahead of his time with this skit from 2003:
