AI and the All-Intangible Economy

The only time hardware is worth the headache is if it’s critically necessary and transformative

Commerce has historically been bound to the physical. From the first barter systems exchanging grains and livestock to the modern global trade networks dealing in cars, clothing, and raw materials, economies have thrived on tangible goods. Yet, as humanity stands on the verge of technological breakthroughs, a fundamental shift is occurring—one that leads to the complete dematerialization of the economy. In a matter of decades, physical goods may become relics of the past, replaced by an entirely intangible economic system where value is derived solely from software, knowledge, and digital constructs. What does such a world look like, and is it even feasible?
In their book “Capitalism without Capital”, Jonathan Haskel and Stian Westlake explore the rise of intangible assets—such as software, design, and brand equity—and their growing dominance in modern economies. Unlike tangible assets, intangibles scale easily, create spillover effects, and favor firms with strong networks. The book highlights how traditional financial systems struggle to account for these assets, leading to economic disparities and challenges in investment. The authors argue that policymakers must rethink taxation, infrastructure, and education to adapt to this shift. Ultimately, the book provides a compelling case for why the intangible economy is reshaping capitalism and driving future economic growth.
The shift toward an intangible economy is already well underway. Software has replaced hardware in many industries; cloud computing has resignified the need for personal storage; digital books, music, and film have made physical media almost obsolete. Even financial institutions have become predominantly digital, with cryptocurrencies and decentralized finance questioning the need for traditional banks. A fully intangible economy would take these trends to their logical extreme. In such a system, everything from work to entertainment to consumption would exist in a purely digital or intellectual space. Goods and services would no longer require physical production but would be conjured from algorithms, artificial intelligence, and cognitive labor.
Several key advancements would enable this transition. Advanced artificial intelligence would need to be capable of generating not just products but entire economies of innovation. Current AI models already produce literature, art, and even scientific research¹. Future iterations could replace nearly all forms of human labor, driving an economic model where value is determined by the rarity and uniqueness of digital intellectual property and original knowledge. Extended reality, metaverses, and digital existence would play a significant role. With immersive virtual and augmented reality, individuals could exist primarily in digital spaces. Work, socialization, and even sensory experiences would be simulated, eliminating the need for physical commodities. Digital fashion, for instance, already holds value in gaming and virtual social platforms.

“The longer I made things, the more I realized that many things don’t need to be made.”

Tony Fadell

The primary bottleneck of digital economies is energy. A world running entirely on software and digital constructs would require massive computational power and power generation capabilities. However, advancements in quantum computing and renewable energy sources like nuclear fusion or space-based solar power could make data processing virtually limitless, allowing all economic activity to exist as pure computation. Digital goods still require scarcity to hold value. Blockchain technology has already demonstrated how digital ownership can be enforced through non-fungible tokens and smart contracts. In a fully intangible economy, everything—art, education, social influence—could be tokenized, creating an economy based entirely on verifiable intellectual scarcity.
A world without physical products would need to rethink fundamental aspects of human existence. Consider housing: if individuals spend most of their time in digital environments, would physical residences become obsolete as we know them? Perhaps people would reside in minimalistic, standardized dwellings, with their wealth reflected in the quality of their virtual environments rather than their real-world assets. Employment would also shift entirely. The concept of work might transform into pure creative or intellectual contributions. AI-driven automation would eliminate most traditional labor, leading to a universal basic income system where wealth distribution is based on participation in digital communities, idea generation, or influence in social digital spaces. Even food could become an intangible construct. With advanced neurotechnology, pleasure centers in the brain could be stimulated to simulate the act of eating without consuming physical sustenance. For those who still require biological nutrition, lab-grown or nanoengineered food solutions could be delivered in ultra-efficient, compact forms, eliminating the need for agriculture as we know it.
While the benefits of such a system are immense—eliminating resource scarcity, reducing environmental destruction, and providing limitless creative opportunities—there are significant risks as well. Digital inequality could become a major issue. Just as economic disparity exists today, a digital economy could exacerbate class divisions. Those with access to premium digital spaces, AI-driven enhancements, or intellectual property rights could form an elite class, controlling vast portions of intangible wealth. Cybersecurity risks would also be heightened. If all economic value exists digitally, it becomes vulnerable to hacking, corruption, or systemic crashes. A catastrophic cyber event could erase entire economies in seconds, leading to chaos far worse than any traditional financial collapse. Some might argue that a world without physical goods strips humanity of essential experiences. Can a virtual sunset truly replace a real one? Would a life spent in simulated realities lead to existential ennui or a lack of genuine connection? If AI and digital constructs replace all tangible existence, does meaning itself become irrelevant? If one can simulate any experience at will, does the pursuit of goals, personal growth, or even human relationships lose their significance?

“People often get excited about making something with atoms—they dig into the design, interface, colors, materials, textures—and instantly become blind to simpler, easier solutions. But making anything with atoms is incredibly difficult. The only time hardware is worth the headache of manufacturing and packaging and shipping is if it’s critically necessary and transformative. If hardware doesn’t absolutely need to exist to enable the overall experience, then it should not exist.”

Excerpt From “Build”, by Tony Fadell

Perhaps the most intriguing question is what value even means in a fully intangible world. Today, value is often tied to scarcity and physical constraints. In an economy where knowledge, creativity, and digital experiences are the primary commodities, the definition of wealth itself could change. Success might not be measured by material accumulation but by influence, creativity, or unique intellectual contributions. In many ways, this transformation could free humanity from the burdens of material need. Poverty, hunger, and resource wars could become obsolete. If AI and digital systems can provide unlimited abundance in knowledge and experience, perhaps the only real pursuit left would be the maximization of personal fulfillment ∎.

1. https://www.nature.com/articles/s41598-021-89743-x