The Vienna Nexus: Five thinkers who coded the operating system of modernity

Published on 25 August 2023
Updated on 19 March 2024

If you look for ‘the source code of the operating system’ of modernity, you will end up in Vienna between the two world wars. After the dissolution of the Austro-Hungarian empire in 1918, Vienna was a vibrant hub of intellectual debates on society, from philosophy to economics and psychology.

Among the many thinkers of that period, five are the most relevant for our era: Ludwig Von Mises, Joseph Schumpeter, Friedrich Hayek, Sigmund Freud, and Ludwig Wittgenstein. Each of them contributed critical ideas that shape our society and digital developments in particular.

Their ideas got new life and a broader impact as they left Vienna before the outbreak of the Second World War. Many made prominent academic careers in the United States, where their ideas and concepts have influenced economic and political life. We need to understand the opus of these five Vienna thinkers to comprehend the concepts behind our society, digital transformation, and the emerging AI era.

This blog aims to recycle the ideas of Vienna thinkers and show their relevance for our current debates on digital and AI developments.

Ludwig Von Mises: Choice is king

 Photo of Von Mise

If one were to summarise Ludwig Von Mises’s central thesis in a tweet, it might proclaim: “Individual choice and consumer sovereignty are the keystones of the digital era.” At the heart of Von Mises’s philosophy lies the concept of praxeology, which focuses on deliberate actions guided by personally chosen objectives.

Often labelled a market fundamentalist, Von Mises insisted that market forces outperform any form of governmental regulation. He was vocal against government interference, maintaining that it perilously skews free choice. His philosophy has inspired a generation of cyber-libertarians and resonates well with digital platforms whose business models hinge on monetizing consumer choices. 

However, Von Mises’s principles of free choice are facing growing scrutiny in the modern digital era. Critics contend that the apparent freedom offered by digital platforms can be misleading, as genuine free choice becomes twisted by algorithms, creating echo chambers and filter bubbles.

The criticism Von Mises levied against government intervention as a market distortion may need reassessment, considering the need for public control of the enormous monopolistic power of big tech companies. 

In a new twist, big tech companies are calling on governments to regulate AI in order to prevent a potential ‘AI Armageddon’. On first glance, it can sound paradoxical given previous corporate aversion to any government intervention. However, by using a fear-mongering framing of AI, major tech companies may aim to establish new AI monopolies by preventing newcomers in AI mainly from open-source communities. Supporters of this interpretation usually quote discrepancies between tech companies’ words and actions. While warning about AI threats, they increase investment in developing more powerful AI. Whatever AI governance brings, Von Mises’s principles of free choice and consumer sovereignty will remain at the centre of policy and regulatory debates. 

Joseph Schumpeter: Creative destruction

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Joseph Schumpeter is renowned for the theory of “creative destruction,” illustrating the continuous cycle where new industries emerge and old ones decline, a phenomenon ever-present in the digital age. This process was evident when Facebook replaced MySpace, Uber disrupted traditional taxi services, and Airbnb posed a challenge to the established hotel industry.

While supportive of innovative and creative destruction, Schumpeter warned of the possible rise of monopolistic practices stemming from technological advancement. His view that monopolies become transient due to competition may be proven wrong in the digital era as tech giants strategically acquire start-ups, tame competition, and solidify their monopolistic positions. 

In the unfolding era of AI, Schumpeter’s idea of “creative destruction” gains fresh significance. AI technologies are on the brink of disrupting diverse industries, from manufacturing automation to a healthcare revolution in diagnostics. Like the manufacturing upheaval that the assembly line once sparked, AI is likely to create major destruction of white collar work with enormous impact on economy and society.

AI’s rapid proliferation also triggers concerns over monopolistic domination and power concentration. Tech behemoths like Google, Amazon, Meta, and Microsoft spearhead AI research and development, possessing the means to amass top talent and assimilate burgeoning startups, thus furthering their control. This is a scenario Schumpeter explicitly cautioned against – a monopolistic landscape that impedes competition, innovation, and consumer freedom.

Schumpeter’s insights also extend to the labour market, as AI’s rise has ignited discussions about itsl impact on employment. The conventional Schumpeterian belief that vanished jobs would be replaced by new ones must be reassessed in the AI epoch, as AI may eliminate more jobs than it creates.

Furthermore, Schumpeter’s emphasis on entrepreneurship’s role is echoed in a surge of startups seeking to employ AI for problem-solving. 

In conclusion, Schumpeter’s theory of creative destruction will have continuous relevance. Although the destruction of current practices, businesses, and jobs is a given, a creative response is needed with new ideas, jobs, and business models. 

Friedrich Hayek: Knowledge as a key to progress

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Knowledge, a key concept in Hayek’s opus, is also the pillar of digital and emerging AI economies. Hayek advocated knowledge-driven innovation as a pathway to societal efficiency, a principle that has undeniably fueled many technological advancements.

In particular, his work on ‘tacit knowledge’, understood as a mix of intuition and skills, is central for AI developments. This form of knowledge, unearthed through data mining and behavioural analysis, sheds light on behaviour patterns and has significant economic and political implications. The battle to codify the tacit knowledge of the world’s population is at the centre of AI competition. 

The digital age resonates strongly with Hayek’s concept of dispersed knowledge. He envisioned optimal economic outcomes stemming from decentralised decision-making that mirrors a collective sum of individual insights. This idea found tentative expression in blockchain technology, with its decentralised ethos. However, the full realisation of this promise remains elusive, and the concept of dispersed knowledge faces potential threats from centralisation and monopolisation by leading AI entities.

Furthermore, Hayek warned about ‘the pretence of knowledge,’ as an overconfidence in our ability to comprehend and manipulate complex systems. This caution finds a poignant echo in the world of AI, where neural networks and deep learning models often elude even their creators’ understanding. This mysterious ‘black box’ aspect of AI can spawn unexpected outcomes and hazards, reaffirming Hayek’s insights about the boundaries of our comprehension.

Hayek’s caution against centralisation and his support for individual liberties open vital discussions about data privacy and digital control in today’s interconnected world. With large tech corporations enjoying unparalleled access to personal information, debates surrounding data ownership, privacy, and the government’s regulatory role have become increasingly significant.

In conclusion, Hayek’s intellectual legacy is critical for understanding the key dilemmas of the AI era. His thoughts on dispersed and tacit knowledge, coupled with his warnings about the limitations of our understanding, offer essential guidance for navigating the complexities of AI. Simultaneously, his reservations about centralization and his stress on individual autonomy contribute valuable warnings against the risk of monopolising AI power.

Sigmund Freud: The psychological underpinnings of social media and AI

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Sigmund Freud, widely recognised as the founding figure of psychoanalysis, laid the psychological groundwork that has resonated strongly with the modern digital economy. He asserted that human behaviour predominantly stems from subconscious and often irrational impulses.

These insights have taken on new life in our digital age, where the myriad traces we leave online furnish tech companies with invaluable data about us that is subsequently processed, packaged, and sold to advertisers.

In the era of digital technology and AI, Freud’s proposition that the unconscious mind exerts a profound impact on our actions has become a guiding force. It shapes the methodologies behind targeted advertising and recommendation engines that social media and e-commerce giants employ. These sophisticated algorithms uncover and exploit unconscious preferences and desires, seeking to guide and manipulate consumer choices and behaviours.

Freud’s ‘Pleasure Principle,’ the theory that individuals instinctively pursue pleasure and evade pain, finds its contemporary reflection in the design ethos of social media and digital interfaces. The instant rewards of notifications, ‘likes,’ and other digital affirmations serve to engage users in ways that can foster addictive behaviour patterns.

The depth of Freud’s understanding of human emotions and drives also offers a potential foundation for the burgeoning field of ’emotional AI’ or affective computing. These systems aspire to comprehend, interpret, and react to human emotions, often grounding their approach in Freudian conceptions of emotional dynamics.

Freud-inspired digital developments triggered a vivid ethical debate. There is a sharp criticism of leveraging psychological tenets to shape and potentially control user behaviour, frequently beyond conscious awareness or explicit consent. Such practices could diminish self-esteem, exacerbate social divides, and cause serious mental health problems.

Freud’s exploration of defence mechanisms might illuminate our understanding of privacy and security responses in our data-driven world. Individuals might unconsciously deploy mechanisms like denial or repression to cope with an increasingly invasive digital environment where personal information is ceaselessly spied on and privacy is constantly at risk.

In conclusion, Freud’s nuanced understanding of the human psyche has found unexpected yet potent applications in our digitally infused world. His theories continue to enrich our comprehension of our relationship with technology by driving advertising strategies, shaping the user experience, and spurring vital dialogues on ethical norms and regulations. In an era where the boundaries between the mind and machine continue to blur, Freud’s legacy offers a thoughtful lens through which to view our evolving digital and AI existences.

Ludwig Wittgenstein: Conceptual father of AI – from causation to correlation

 Face, Head, Person, Photography, Portrait, Body Part, Neck, Animal, Kangaroo, Mammal, Ludwig Wittgenstein

Ludwig Wittgenstein’s philosophy influenced the cognitive landscape for the development of AI. The arc of his intellectual career, from his embrace of logical positivism to his nuanced examination of language in context, has resonated powerfully with the evolution of AI.

Wittgenstein explored the connections between formal logic and language in his early work, which is best represented by the “Tractatus Logico-Philosophicus.” This insight resonates well with the foundational principles of early AI, when its development revolved around rule-based systems that were based on formal logical rules.

However, Wittgenstein’s later work marked a paradigmatic shift in his thinking. He conceived language as inherently contextual, intimately intertwined with social practices rather than rigid, formal structures. 

Wittgenstein’s “Philosophical Investigations”, his seminal later work, elucidated the idea that the meaning of language is intrinsically linked to its use within the diverse and lived experiences of human communities. This perspective corresponds to modern AI developments, which give higher weight to contextual probability than logical certainty. Large Language Models, such as ChatGPT and Bard, are designed to ‘understand’ the context of words in sentences and learn from vast amounts of data about how language is used.

Wittgenstein’s thoughts about ‘language games’ and the situated nature of language understanding can be seen as a precursor to current AI development. His idea that language is a social activity grounded in specific forms of life offers a fresh perspective to AI developers who attempt to train models to understand human language in all its complexity and diversity.

In the era of AI, Wittgenstein’s philosophy also raises questions about the extent to which AI can truly understand human language. Wittgenstein pointed out that understanding language goes beyond simply recognising patterns and structures; it involves understanding the cultural, social, and emotional contexts that give the language its meaning.

In conclusion, Wittgenstein’s views on language and meaning have significant implications for AI, guiding the shift from rule-based systems to context-centred AI models. His work continues to inspire AI developers as they attempt to create AI systems that can understand and engage with human language in deeper ways. It remains to be seen if AI’s digging deep into linguistic patterns will surpass the limits of our understanding that Wittgenstein wrote about. As AI’s advances into Wittgenstein’s ‘grey zones’ of language understanding, it could be a moment when AI may become sentient, if ever.

Parting thoughts

The intellectual frameworks developed by the Vienna thinkers provide a profound understanding of the roots of our digital age. From Ludwig Von Mises’s advocacy for individual choice to Friedrich Hayek’s emphasis on knowledge, these thinkers provide a foundation for understanding the digital economy’s market dynamics. Sigmund Freud’s insights into human psychology underpin the mechanisms of digital advertising, user engagement, and emotional AI. Ludwig Wittgenstein’s thinking on language corresponds very well with the latest AI developments centred around Large Language Models.

However, their ideas are not merely historical relics; they continue to stimulate reflection and debate. Schumpeter’s caution against monopolistic tendencies is echoed in contemporary discussions about tech giants’ dominance. Hayek’s warnings about knowledge centralisation resonate in debates about data privacy and AI control. Freud’s theories raise ethical concerns about manipulating user behaviour in the digital world. Wittgenstein’s insights about language challenge AI developers’ attempts to mimic human knowledge and consciousness. 

In sum, the Vienna thinkers have left a lasting imprint on human society, shaping how we think about economics, psychology, and language. As we grapple with the rapid evolution of digital technologies and their impact on our lives, their legacies continue to prompt reflection, criticism, and inspiration as we tread the intricate path of AI developments.

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2 replies
  1. Valentin Nikolov
    Valentin Nikolov says:

    Dear Jovan and Team,
    I wish to reassure you that the Recycling Ideas newsletter is timely and very useful.
    Thank you for this intellectual and creative effort!
    Valentin (Diplo alumnus, current diplomatic officer)


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