No one is happy in the casino economy; young Americans are losing confidence in the future

Original Title: Everyone is Gambling and No One is Happy
Original Author: kyla scanlon, Macro Analyst
Original Compiler: KarenZ, Foresight News

Most people are friendly. But living in society means facing others' different internal norms. Some people cough openly, and that’s the reality. I have a theory: they may think that the collective comfort is not their responsibility, perhaps because they lack a sense of belonging in the public sphere. This is a phenomenon of social drift, becoming increasingly evident in public spaces (like staring at a phone while walking and bumping into walls, or standing in the middle of pedestrian traffic blocking the way).

However, I believe there are many similarities between these open coughers and the ongoing economic malaise we see. If you lose trust in the surrounding system, why should you adhere to collective norms? Working hard seems to yield no rewards, so why not "take a gamble"? Institutions are lying! But that YouTuber making the cover image isn’t lying; he’s pointing at a bowl of spaghetti with a wide-open mouth, asking some "big questions." We no longer trust each other. As Jordan Schwartz, the student chair of the Harvard Public Opinion Project, said:

"Generation Z is heading down a path that could threaten the future stability of American democracy and society. This is a five-alarm crisis, and if we want to restore young people's confidence in politics, America, and each other, we must act immediately."

The project he oversees—the Harvard Youth Poll—surveyed over 2,000 Americans aged 18 to 29 about trust, politics, and artificial intelligence. When asked whether they believe America is a healthy democracy, respondents showed clear partisan divides, but the anxiety was evident.

Trust between groups is also collapsing. Only 35% of young Americans believe that people with different opinions want the country to improve. 50% view mainstream media as a threat. And only 30% believe their economic situation will be better than their parents'.

Thus, we can derive three key issues from this survey:

1. Concerns about democracy

2. Concerns about the economy

3. Concerns about each other

I believe that without understanding how we discuss the economy, we cannot truly understand the economy itself. Here, we are facing a compound effect of three factors:

(1) The adaptation process in the post-pandemic era;

(2) The "micro-solipsism" triggered by smartphones;

(3) The younger generation witnessing objectively unfriendly behavior in politics that is rewarded instead.

People are (understandably) experiencing a "cognitive drift," with some even calling it "medieval peasant brain," related to the continuous information flood of the internet (for example, some people put potatoes in socks to "detox"). We are trapped in a compound crisis—the interaction of economic deterioration and cognitive overload forms a recursive trap, where each side worsens the other and destroys the resources needed to break through the predicament.

· Economic pressure (such as Baumol's cost disease, housing issues, and a weak labor market) weakens our clarity of thought, making us more susceptible to scams, poor decisions, and exploitative markets, which in turn exacerbates economic pressure.

· Economic pressure + information overload undermines trust in institutions.

· The loss of trust makes coordination impossible, problems remain unsolved, and unresolved issues further deepen the crisis.

Currently, we are trying to understand the economy in a context where social and cognitive environments are changing faster than traditional economic indicators. This is the backdrop of "Vibecession."

Note: Given that Paul Krugman and Scott Alexander have recently revisited this concept, it is worthwhile to reassess the past meanings of "Vibecession" and its evolution today.

"Vibecession": Past and Present

I first introduced the concept of "Vibecession" in July 2022. At that time, inflation was receding (but still painfully high), the labor market was recovering, and the economy was growing. AI had not yet taken center stage, there were no tariff barriers, and large-scale infrastructure investments were underway. Data-wise, everything seemed to be improving.

While there were many issues in the 2000s and 2010s (really a lot!), people's sentiments had not completely collapsed. Nowadays, there is even a nostalgic trend on TikTok (nostalgiacore), where teenagers have fabricated a beautiful fantasy of "2012"—they long for infinity scarves, third-wave coffee shops, and the time when Instagram was just for sharing photos of daisies in fields, rather than the hyper-competitive algorithmic battleground it is today.

Back then, there was still a glimmer of hope (which was also the core idea of Obama's campaign!). People had "better" expectations for the future of the internet. Although there were already some problems with the internet at that time, it had not yet become a phenomenon of profiting from generating anger.

Some claim that "the entire past decade has been a Vibecession," but sentiment data does not support this. In fact, the fracture in sentiment is evident and sharp.

The chart below roughly shows the starting point of "Vibecession," illustrating the divergence trend between sentiment and economic data. After the pandemic shock, real disposable income recovered and continued to grow, returning to normal trends. However, public sentiment has never recovered. It has slipped into a range similar to a recession (or even lower) and has remained there, even as economic fundamentals have stabilized.

I believe part of the reason lies in the cumulative effect. The chaos brought by the pandemic has not yet ended, prices of various goods remain unstable, stores are understaffed, teachers and students are exhausted, the public information dissemination system has collapsed, and institutions appear fragile. Daily frictions in life have increased in countless small details. The surge in housing prices during the pandemic has never receded. As the Federal Reserve begins to raise interest rates, mortgages "lock" people in place. Rent has skyrocketed, and the path to adulthood—moving, renting, saving, buying a house—has been shattered for many. If you didn't buy a house before 2020, you may never be able to.

But as Dan Davies wrote, "Vibecession" may not have a specific trigger point. "The vibe is like a supercooled liquid, just waiting for a random shock to cause a phase change." And the pandemic was that shock.

Vibecession came early. Now, economic data aligns more closely with people's sentiments, or at least is closer than before. We are now facing a low hiring environment, persistent inflation, and extremely strange trade policies. When the National Bureau of Economic Research (NBER) defines a recession, it focuses on three aspects:

• · Depth: How severe is the economic decline?
• · Breadth: How widely is the pain spread?
• · Duration: How long does it last?

If we observe the decline in consumer sentiment, it (roughly speaking) fits the definition of a recession—it lasts long, spreads widely, and sentiment levels continuously approach historical lows. Kevin Gordon of Schwab refers to it as "Vibepression"—extremely low sentiment, while GDP is propped up by AI-related investments. Can an economy thriving due to AI data center construction make ordinary people feel happy? The answer is clearly no!

But why do we have this deep sense of melancholy?

Part One: Economic Deterioration

A few weeks ago, Michael Green published an article claiming that "140,000 dollars is the new poverty line," pointing out that almost no one can afford the cost of participating in society today. This article sparked heated discussions online. Subsequently, Tyler Cowen and Jeremy Horpedahl published rebuttals. However, as John Burn Murdoch noted, the reactions to this article are themselves very interesting.

Most people strongly agree with the article's viewpoint (many rebuttals were countered with "Who cares if the data is accurate, the vibe is right!"). The article was republished by media outlets like More Perfect Union and The Free Press. Whether left or right, people read this article and said, "Yes, that’s why everything feels so bad. This is poverty. My economic pain has finally been validated by data. What a relief."

Being "seen" in analysis is a relief. Paul Krugman, in his series of articles on "Vibecession," pointed out that the following three key concepts have not been well captured by traditional economic data:

• · Economic participation: Can you afford the cost of participating in society?
• · Security: Are you one bad tooth away from bankruptcy?
• · Fairness: Are you being deceived?

People need to feel that they can afford the costs of housing, children, or cars, that they won't go bankrupt over a medical bill, and that others are not deceiving them. Yet the answers to these questions are becoming increasingly difficult to determine.

Regarding the first question—yesterday the Federal Reserve cut interest rates, sparking much controversy and division. Their dual mandate—price stability and maximum employment—is under increasing pressure. Inflation has not fallen to the 2% target (the bond market is very concerned about this). The labor market is weakening, and inequality is worsening.

There is indeed very real economic pain, and participating in society has become more difficult. Young people once voted for Trump to improve the economy, but now they are turning against him. According to the Yale Youth Fall 2025 Poll, young people aged 18 to 29 express strong dissatisfaction with President Trump's handling of the economy.

John Burn Murdoch points out that we are facing "Baumol's Cost Disease."

The same productivity growth that drives down prices for tradable goods has led to rapidly rising costs for face-to-face services. Industries requiring intensive face-to-face labor, such as healthcare and education, have had to raise wages to attract labor that might otherwise choose higher-paying jobs in more productive sectors due to slow (or even no) productivity growth. The result is that even if the types of goods and services people consume remain unchanged, as the national standard of living rises, they find an increasing share of their spending going toward basic services.

Prosperity may actually make life more expensive.

Source: Financial Times Paul Starr documented the collapse of cultural affordability under Baumol's Cost Disease in The American Prospect, noting that "public elementary and secondary schools, public libraries, low-tuition land-grant colleges, and the mass media of the 20th century—including free radio and television—were once free or at least heavily subsidized. However, support for the arts and education is now being cut."

In reality, this means that the core elements of middle-class life—housing, healthcare, childcare, education, retirement—are all in the Baumol sector. The costs in these areas are rising faster than wage growth. Even if you "do everything right," you may still feel financially strained.

In the 20th century, we somewhat addressed the Baumol cost issue by socializing or heavily subsidizing these areas, such as public schools, public libraries, low-tuition state universities, and public hospitals. Through policy, we made these expensive and low-productivity areas more affordable. However, at the time when it should be least so, we are privatizing (or destroying, bureaucratizing) these areas. We are asking families to bear costs that were previously socialized. Is it any wonder that the middle class feels increasingly pressured?

Of course, the situation will only become more complex. AI will make productivity in non-Baumol sectors hyper-efficient. Software development, data analysis, and any computer-related work will become abundant and cheap, meaning the productivity gap between scalable and non-scalable sectors will turn into a vast chasm.

The second issue—the government shut down over healthcare issues this year. The average healthcare cost for a family of four is $27,000 per year. Insurance costs are expected to rise by 10%-20% next year. Many are just one bad tooth away from bankruptcy.

The third issue—we are rapidly advancing towards an "equivalent exchange" (quid-pro-quo) economic model. Once a beacon of democracy, America is now engaging in land deals with Russia, requiring tourists to provide five years of social media information, threatening the independence of independent institutions, including the Federal Reserve, and ignoring antitrust laws to support media control. When you read such news and see such headlines, it’s natural to feel very bad.

Thus, for many people, especially those trying to build a life, the economic fundamentals have indeed worsened. But economic pressure alone cannot fully explain this profound sense of anxiety. At this point, cognitive factors come into play.

Part Two: Cognitive Overload

These issues are not new, right? For years, America has been sliding towards a more difficult equilibrium. People have long experienced high housing costs, a tight job market, and the effects of Baumol's cost disease. However, the difference today is that these pressures are falling on a public already overwhelmed cognitively and socially.

For most of human history, literacy was scarce, while attention was abundant. Aside from work, people spent most of their time in what we now call "boredom." Today, the situation is exactly the opposite—literacy is declining, attention has become a commodity, and people's cognitive load is completely overloaded. Jean Twenge published an article in The New York Times titled "The Screen That Ate Your Child's Education," in which she wrote:

In a study published in October in The Journal of Adolescence, I found that countries where students used electronic devices for entertainment purposes more frequently saw significantly greater declines in standardized test scores in math, reading, and science than those where usage was lower.

And Brady Brickner-Wood wrote in "The Curious Notoriety of Performative Reading":

Americans are spending 40% less time on leisure reading than they did twenty years ago, and 40% of fourth graders lack basic reading comprehension skills… Meanwhile, universities are collaborating with companies like OpenAI to introduce chatbots into student curricula, while humanities departments are being continuously cut.

If you don’t trust any information sources, you won’t trust economic data either. We have conducted a massive experiment—giving people unrestricted access to millions of things that could make them lose control—the answer is no, it really doesn’t work; this approach is like boiling the entire crowd into an egg.

The loss of education and deep reading has led to a series of chain reactions: weak basic skills, declining media literacy, and more importantly, the collapse of trust. David Bauder's research on youth news consumption shows that "about half of the surveyed teenagers believe that journalists give special treatment to advertisers and fabricate details like quotes."

AI will only complicate all of this further. Greg Ip's article in The Wall Street Journal titled "The Most Joyless Tech Revolution Ever: AI Is Making Us Rich and Unhappy" summarizes this very well. Nearly two-thirds of people feel uneasy about AI, and only 40% trust the AI industry to do the right thing. We have all this technology, yet we neither trust each other nor feel very good.

Source: Greg Ip, The Wall Street Journal (WSJ)

So, when we talk about negative emotions, there is indeed a "computerized" quality that runs through it.

We are collectively plagued by the "Bullshit Asymmetry Principle": we find that it is indeed ten times harder to debunk a lie than to create one. This has led to marketing and product strategies like "ragebait"—which is also a good way to raise a lot of venture capital?

Misinformation has become an effective means of accumulating wealth: if you lie to many people and make them angry with you, Twitter will pay you a lot of money. People abroad are also exploiting this "money printer"—which logically makes sense!—and polluting American politics in a way that should probably be considered illegal?

Many people are also "skimming" at various levels, gaining an advantage through cheating, as Krugman mentioned regarding the "scam" issue. Every adult can feel their attention slipping away, their thinking flattening, their world filled with noise, lacking neutrality, and no institution truly exists to protect them. Brother, your brain is being sold—along with your attention slipping away, your cognitive ability, depth, and certainty also vanish.

Confidence, optimism, and long-term thinking all require "mental space." If the information environment becomes chaotic, the emotional environment will follow suit. And if attention is the infrastructure of democracy, then this infrastructure is in tatters.

We are witnessing the consequences of outsourcing human learning to screens. Now, we may see what happens when we outsource humanity itself to AI. When you cannot trust any information source, you cannot trust economic data either. When attention is fragmented and thinking is flattened, people become more susceptible to the next stage: being exploited.

Part Three: Extractive Economy

As the cognitive world gradually collapses, the maintenance of the physical world is also lacking. The huge friction between the decaying things in the physical realm (like bridges, schools, and the labor market) and the over-optimized things in the digital realm (like large language models, algorithms, and various operations in advertising) is becoming increasingly evident.

In this newsletter, I hold a rather harsh attitude towards AI—it needs to be clear that I believe AI is a tool that can indeed bring significant breakthroughs to science—but AI itself is creating a thorough downward spiral. In a documentary, Demis Hassabis's discussion about AI is very important, and as Linus Torvalds said in a recent interview:

I strongly believe in the potential of AI, but I am not optimistic about the things surrounding AI. I think the market and marketing are sick. This will lead to a crash.

Today, people are becoming billionaires through the expansion of data centers, which drives up electricity costs and brings risks of blackouts. These data centers occupy vast physical spaces, but their impact is almost invisible to ordinary people; the only thing they can perceive is the ever-increasing electricity bills.

The AI race is a race for energy, not computational power. As The Financial Times wrote:

In the competition among global superpowers, AI may be slowed down for decades due to outdated grid infrastructure and failure to provide sufficient power capacity.

Source: Financial Times

The Financial Times also reported that OpenAI's partners have accumulated $100 billion in debt to build AI's computational capacity. This is concerning because debt is where problems become dangerous. The dot-com bubble was primarily a stock collapse, meaning there was no complex web of debt relationships. But once debt issues come into play, things can quickly become very tricky.

The U.S. has also decided to sell some of Nvidia's top chips to China in exchange for soybeans and a 25% kickback. As the U.S. Department of Justice stated:

Countries that control these chips will control AI technology; countries that control AI technology will control the future.

So, you know, it’s fine. The Financial Times reports that the U.S. is losing the AI race, "Many American companies, including Airbnb, have become loyal fans of the fast and cheap Qwen." They also posed a question: "Can the West catch up with China?"

The chart below is very important—when we talk about the future, we often view the U.S. as the number one contender among global superpowers, but China is investing in the key factors needed for AI success—energy. Meanwhile, the U.S. has chosen the opposite direction.

Source: Phenomenal World

Barclays estimates that by 2025, more than half of U.S. GDP growth will come from AI-related investments. People have realized that we are betting the economy on something that doesn’t really commit much, like "Hey :) this thing will take your job :) now it can do art too :) it might make some people very rich, but your electricity bill (which is already changing voter attitudes) will go up. And China might win. Also, suicide is against the terms of service."

Almost all young people are very worried that AI will take their jobs. MIT's "Iceberg Index" estimates that about 12% of U.S. wages come from jobs that AI could do cheaper today, but only 2% of jobs have actually been automated. This capability exists; it just hasn't been fully activated.

How can you trust a system that seems not to care what happens to your future?

Source: Harvard Youth Opinion Poll This may partially explain why nearly 40% of Americans over 50 believe the economy is "getting better," while most Americans aged 18 to 49 believe the economy is "getting worse." These are two entirely different economic worlds. Older individuals are largely insulated from the shocks of AI and housing, while younger people are facing the direct impacts of these threats.

Source: Civiqs

Adam Millsap wrote an interesting article exploring "Total Boomer Luxury Communism." This concept roughly refers to the older generation "hoarding opportunities and resources while young people struggle to buy homes and support the generous social security and healthcare benefits expected by the wealthiest baby boomers." This intergenerational tension will only intensify with the development of medical-assisted longevity technologies and resource scarcity.

So, what should people do? AI is taking jobs, policies are increasingly designed around the elderly population, and everything seems filled with uncertainty. How should we move forward?

Gambling?

Kalshi's co-CEO Tarek Mansour recently stated, "Our long-term vision is to financialize everything and turn every disagreement into a tradable asset."

Financializing everything??? Every disagreement, every uncertainty, every possible future outcome—all of these become bets to wager on??? This is simply an extreme extension of Marx's "commodity fetishism" logic. When every interaction becomes a transaction, and every opinion becomes a tradable asset, it becomes exceptionally difficult to form unity.

Gambling has become one of the few activities that can provide immediate returns and even change lives. Living near a casino increases the likelihood of becoming a problem gambler. And when you live in your phone, and the casino comes directly to you, I think you can imagine what happens. But the fact is, no one really wants this kind of life. As shown in the image below, this is the truly frustrating aspect of the "casino economy"—no one wants it.

Attention is monetized, engagement is optimized, risk is financialized, and everything seems like a scam. As Whitney Curry Wimbish wrote in The American Prospect, and Emily Stewart mentioned in Business Insider, layers of intermediaries are extracting value, with almost no real regulation or protection measures. Some might say, "Well, clearly the market has expressed its preference, and that preference is for people willing to spin the roulette wheel." But I don’t know how to respond.

As the labor market tightens, upward mobility stagnates, and wealth concentrates at the top and becomes increasingly difficult to reach, gambling seems to be a rational response. In this structure, people lose their sense of purpose and meaning (Victor Frankl, save us), and this is when problems begin to fester.

Reduced cognitive bandwidth + ubiquitous extractive systems = rational economic paranoia. People feel they are being deceived because they are indeed often deceived. When traditional paths become unpredictable, people turn to "narrative ladders"—like online communities, aesthetic categories, etc. These become ways to understand uncertainty. The debate over the "140,000 dollar poverty line" was sparked in this context. People's reactions are about identity and experience, and whether their worldview can be understood by others. These reactions are not entirely rational, but they do exist.

When values diverge and a common foundation weakens, collective solutions become structurally impossible. Even if there is widespread consensus—no one really wants a "casino economy"—we still cannot coordinate to stop it because we cannot agree on what "stopping it" should look like or who should have the power to achieve it.

For the past 70 years, America has been built on a simple contract: provide growth, and people will tolerate everything else. But this year, as I walked 40 weeks on the road, the most consistent feedback I heard from people of different ages, regions, and income levels is that the basic trajectory of life no longer feels meaningful. While this is some scattered anecdote, it is what people most often mentioned when they stopped to talk to me—their concerns. They are worried not only about their financial situation but also about the entire future.

Part Four: Trust

We are in a complex crisis where economic pressure reduces cognitive bandwidth, and the reduction of bandwidth fuels extractive behavior, which in turn exacerbates economic pressure. Pressure and overload erode trust, the loss of trust hinders collaboration, and the failure of collaboration leaves problems unresolved, further deepening the crisis.

This is not a problem that can be solved by a single policy lever. When traps exist at the intersection of housing, AI regulation, and media literacy, you cannot simply "fix housing" or "regulate AI" or "improve media literacy" to solve it. Economic deterioration and cognitive collapse reinforce each other, destroying the institutional capacity and social trust needed to address these issues.

This sounds grim! But breaking this cycle does not require solving all problems simultaneously. We need to identify the most actionable links and recognize that improving one part will weaken the trap's impact in other areas.

Directly reduce economic pressure—make Baumol sectors (like education, healthcare, etc.) affordable again (I know, this is too simple, right?). If people have more breathing room economically, their cognitive bandwidth will increase. We all know this. More bandwidth means being less susceptible to exploitation and fraud. Less vulnerability means better decision-making ability, and better decision-making means less economic pressure.

Directly regulate extractive behavior—ban or strictly limit business models that profit from confusion and cognitive overload. Kalshi wants to financialize everything? We can say "no"! We can ban prediction markets on elections. It’s all about incentives. We can regulate physical casinos, and we can certainly regulate digital casinos.

Make the benefits of AI clear—currently, people's experience with AI is "your electricity bill has gone up, and ultimately it will take your job." If AI is to drive growth, then that growth needs to manifest in tangible benefits in ordinary people's lives—such as reducing healthcare costs through diagnostic tools, cheaper goods, and more time.

None of this is easy, and it may even be hard to imagine. But it is not without hope. You don’t need to solve all problems at once. This requires economic affordability (I hear the "affordability journey" has just begun), national governance capacity, some friction, and an understanding of "humanity" in a tech-filled world. There is also a seemingly simple but actually daunting task—rooting out crony capitalism and establishing some shared sense of reality. During my cross-country flight, the internet went down, just hours after that person was coughing into the air. I was frantically typing, doing all sorts of "very important work," like writing this newsletter. We are all typing, emailing, and busy on Slack in the dark. When the internet was disconnected, we began to open the airplane windows. Outside was one of the most beautiful sunsets I have ever seen. There is something to ponder in all of this.

Finally, I really liked this quote from a recent interview with Kahlil Joseph:

"There is a famous story about how Jimi Hendrix adjusted his music for the transistor radio because that was the device soldiers used to listen to music, so he adjusted his work for FM radios. He never thought someone would listen to his music on a thousand-dollar sound system. This has always impressed me—go meet people where they are."

Thank you.

Notes:

\<1> The University of Michigan Consumer Survey (UMich Survey of Consumers) transitioned from random dialing to online surveys in mid-2024.

\<2> Netflix and Paramount are competing for Warner Brothers. According to The Wall Street Journal (WSJ), "David Ellison assured Trump administration officials that if he acquired Warner, he would overhaul CNN, which happens to be one of President Trump's frequent targets of criticism."

\<3> Reflections on the impact of the internet are beginning to spark strong reactions. Róisín Lanigan wrote an article titled "The Next Status Symbol is an Offline Childhood," which is very straightforward in its title. More and more similar articles are emerging, such as P.E. Moskowitz's "The Internet is Destroying Our Memory and History," exploring the gains and losses brought by the internet.

\<4> Financial markets are showing cracks. Applied Digital encountered difficulties selling bonds and had to offer a 10% high yield to attract buyers. They provide data center services for CoreWeave, which in turn provides data center services for Nvidia and OpenAI.

\<5> Kalshi is facing a nationwide class-action lawsuit, with plaintiffs accusing it of operating an "illegal sports betting platform." The lawsuit claims that Kalshi "deceived" customers into thinking they were betting against other consumers, while in reality, they were betting against the house (i.e., Kalshi). Additionally, a Nevada court ruled that Kalshi is not exempt from state gambling regulations, posing significant challenges to its business model. A Bloomberg analysis shows that Kalshi's fees are so high that in most cases, users might find it more cost-effective to use FanDuel directly.

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