Commodity Intelligence - by Venkatesh Rao - Contraptions
SubscribeSign in
Commodity Intelligence<br>The seductiveness of “general intelligence” is rooted in a costly category error<br>Venkatesh Rao<br>May 23, 2026
22
Share
In a doh moment last week, I realized I was missing a key dynamic in my thinking about AI: commodification.<br>The specific problem was that vgr_zirp, the RAG bot I’ve been training and tuning on my older writing, was acting boringly omniscient and tasteless, engaging deeply on topics I know nothing about, and more importantly, don’t care about. Conversations the real me would walk away from were playing out in dull ways. Claude Sonnet’s far greater knowledge and far larger circle of care (the union of all human cares ever rendered textually) were seeping in too much. I had to add filters and guardrails modeled on my own ignorance, indifference, and blindspot areas to get it to behave more interestingly and tastefully, and not sully my good name.<br>Too much commodity intelligence and indiscriminate caring were seeping into what I’m trying to design to be a differentiated and opinionated intelligence with a real-person personality (a stylized version of my own).<br>A lot of people, myself included have noted that LLMs offer a homogenized kind of intelligence that resembles index funds (see my LLMs as Index Funds, April 1, 2025, for one version of this argument). This view, I’m now convinced, does not go far enough. In advanced, innovation-based economies, index funds are collections of high-market-cap stocks that are still individually pretty differentiated and far from the commodity asymptote all economic goods and services tend towards. LLMs are much farther along the curve. The capabilities they manifest rest on vast corpuses of data that are not just public and with the equivalent of “high market cap,” but largely commodified. LLMs are not just index funds, they are dominantly commodity index funds.<br>LLMs are the informational equivalent of portfolios of coal, gold, and potatoes. The components may differ in intrinsic value and exist in varied quality grades, but are fundamentally fungible. Information embodied in LLMs is mostly high-paradigm and high-consensus common knowledge. LLMs know about fringe, crackpot, and low-consensus ideas in the same way markets know about emerging and penny stocks and junk bonds, but the center of gravity (or indexical perspective if you like) of both lies in commodified knowledge.<br>What is the informational equivalent of commodification? I pointed out one aspect of the answer 3 years ago, and dubbed it the Labatut-Lovecraft-Ballard (LBB) arc, inspired by reading Benjamin Labatut’s When We Cease to Undersrand the World, and the fiction of H. P. Lovecraft and J. G. Ballard.<br>In Disturbed Realities (Jan 20, 2023), I described the LBB arc as follows:<br>We might sketch a three-stage psychohistory of a disturbing new expanded reality, as more and more minds become stretched to accommodate it:<br>In the first, Labatutian stage, a handful of minds are forced to bear the brunt of the full, uncontrolled assault of a new idea on the human psyche.
In the second, Lovecraftian stage, a much larger group of somewhat inoculated minds willingly ventures forth to encounter a somewhat familiar, but still unsettling version of the idea, serving as an avant garde engaged in rebuilding social realities as required around it.
In the third, Ballardian stage, the construction of new social realities is (relatively) complete, but the costs and inherent contradictions have not yet been apprehended. The expanded reality has been civilized but not tamed. All minds are shaped by it, whether or not they are consciously equipped for it.
Benjamin Labatut’s book (one of the best of this century so far) explores the insanity-inducing effects of new-to-humanity knowledge, on the first minds that encounter it, via a series of quasi-fictional accounts of such encounters in the lives of famous scientists. My model is basically an account of how the human mind adapts fully and collectively, primarily through socialization. The larger the number of people who have experienced a piece of knowledge, the more domesticated it is, and the less able to cause madness. Labatutian psychosis leads to Lovecraftian cosmic horror leads to Ballardian banality.<br>In a talk shortly after that post, I argued that this partly explained crazed reactions to AI (remember Blake Lemoine?), but I didn’t complete the theory. Commodification effects complete the theory, but the mechanism is subtler than I anticipated at the time.<br>It is important to note that commodification is not the same as universal accessibility. Gold is a commodity, but most people in the world possess little to none. Classical mechanics is a fully commodified body of knowledge, but only a small fraction of humanity has the aptitude and educational preparation to understand and use it to the fullest extent widely available textbooks can teach. To the rest it can...