The Hollow-Middle: Values Flees the Friction-Free Zone

The Core Invariant Thesis: As Artificial Intelligence drives the cost of "processing" (tokenizable cognition) to zero, value evaporates from the middle (execution) and condenses at the edges: the Origin (Physical Reality/Constraint) and the Teleology (Final Judgment/Intent).

We are witnessing the end of the "Middleman Economy", not just in logistics or retail, but in the very act of thinking itself.

For the last century, the bulk of economic value was generated in the middle. In the cognitive sphere, this was the domain of the junior analyst, the paralegal, the programmer, and the marketing agency. Their role was process: taking an input (a client request, a dataset) and applying friction-heavy effort to transform it into an output (a report, a brief, a slide deck). This friction was the source of their wages; they were paid for the time and sweat of transformation.

The world we are moving into is a reality governed by Jevons Paradox: as AI makes this transformation frictionless and effectively free, the middle collapses. But if we look closely, we see this collapse replicating fractally across scales.

The Death of the Draft (micro scale)~ Zoom in to the level of a single task such as writing an email or coding a function. Previously, the "drafting" phase was the hard part. The "blank page" was the enemy. Now, generation is trivial. You can generate a thousand variations of an email or ten different Python scripts in seconds. At this scale, value flees the act of writing (the Middle) and accumulates at the Judgment (the End). The ability to generate is worthless without the ability to discern which generation is correct. The "sender" becomes more valuable than the "writer." The bottleneck shifts from creation to curation.

The Squeezed Agency (meso scale) ~ Zoom out to the level of the firm. The "Middle" here is the boutique consultancy or the 40-person marketing agency whose primary product was "reliable execution." They sold hours of competent processing. As AI-native competitors automate this execution, these firms face a crisis of differentiation. They can no longer survive by being "good enough" at processing. To survive, they must flee to the edges. They must either move to the Origin (owning proprietary data, physical distribution, or "atoms-based" infrastructure that AI cannot touch) or to the Teleology (selling high-level strategy, trust, and accountability ~ essentially, things that cannot be tokenized). The "reliable processor" is dead; only the "infrastructure owner" and the "trusted advisor" remain.

The Bifurcated Economy (Macro scale) ~ Zoom out further to the entire market. We will slow see a split between the Digital and the Physical. In the Digital realm (the middle), where output is easy to compare and replicate, we face hyper-competition and deflation. This is now a "contestable market" with AI-amplified agents/humans. In the Physical realm (the Origin), where you need a plumber to fix a pipe or a human to physically shake hands, value increases. These are "un-contestable markets". As digital noise explodes, the scarcity of physical reality becomes a premium asset. The economy bifurcates into a deflationary digital layer and an inflationary physical layer.

This fractal perspective suggests that friction is a proxy for value. In the past, friction was located in the process of doing work. AI removes that friction. Consequently, value is migrating to where friction remains: in the stubborn, un-simulatable constraints of the physical world, and in the high-stakes, accountable friction of human judgment. To survive this shift, you have to reduce the value gained from selling your ability to process. Instead, you must sell your ability to anchor (in reality) or your ability to decide (in ambiguity). The middle will shrink and go away ~ slowly at first, but exponentially fast as more people start to leverage and use AI.