Revealed preference (what systems do, not what they say)
Ignore the press release, focus on revealed preference.
Revealed preference (what systems do, not what they say)
Many people ignore the concept of revealed preference.
You look at what a system does to understand what it intends to do, in the same way you look at what people do, not what they say.
This is the most reliable way to read any system - especially one that isn’t resource-constrained.
Ignore slogans, infer truth from resource flows, constraints, and trade-offs.
What a system funds, staffs, codifies, and enforces = what it is.
What it says = branding.
To read institutions (government, corporations), you have to ask: “If this talk were true, where are the dollars, jobs, laws, and penalties?”. If you can’t point to them, it’s not real.
The same logic applies to reading people - time, effort, and sacrifice are the hard currency.
Trust patterns, not lines. If actions and words diverge, weight actions.
Incentives > ideals. Money, time, law, and pain paid are invariant across rhetoric.
Opportunity cost is a lie detector. Every “yes” implies a “no” elsewhere - watch what consistently gets “yes”.
If you judge systems and people by what they repeatedly do under trade-offs, and not by what they say, you’re ahead of the game.
Ignoring revealed behavior can be costly.
What “revealed preference” really means (at scale)
Stated preference = press release.
Revealed preference = what the Controllers pay for, permission, protect, and default - especially under stress.
In practice, the Controllers’ true utility function is visible in four places only:
Budget (base + off-balance-sheet guarantees).
Perimeter (what app stores, banks, ISPs, clouds, and pools are allowed/forced to do).
Standards (what is admissible: identity, provenance, audit, revocation).
Exceptions (who is above the rules and when sunsets slip).
Everything else is theater.
The 12 laws of revealed preference (governance edition)
Follow the spend, not the speech. Recurrent budgets beat slogans. One-time grants are camouflage; maintenance lines are truth.
Defaults decide destiny. Whatever is on by default is the policy. Opt-outs are permissioned resistance.
Perimeter > law. A single Acceptable Use Policy (AUP) change at Apple/Google/AWS/banks moves more behavior than a statute. If the Controllers can do it there, they don’t need Congress.
Harmonization is intention. If the same rule appears in US/UK/EU within a quarter, that was strategy, not coincidence.
Emergency is forever. If it required an emergency once, it will be standardized next. Pilots are irreversible.
Admissibility is the choke point. If an AI/decision/data trail cannot stand in court, it will not rule. If it can, it will.
Carrots buy silence, sticks buy speed. The Controllers use money where time allows, frictions where it doesn’t.
Paper beats purity. If the Controllers can wrap risk in ETFs, custodians, or futures, they control the asset’s volatility surface.
Convenience outvotes conviction. A mildly better UX defeats most ideologies.
Cost-of-noncompliance sets adoption. Fines + lost access define the curve; morals barely move it.
Kill-switch > market share. The Controllers prefer systems they can halt, roll back, or revoke to “open” winners they cannot steer.
Sunsets don’t. Any control with a “temporary” label is a one-way ratchet unless it raises the Controllers’ costs.
How the Controllers show their true preferences (even while denying them)
Signals to watch:
Line items: identity, compliance, audit, provenance, real-time payments, cyber for critical infra.
Request for Proposal (RFP) verbs: attest, trace, prove, revoke, rollback, lineage.
Perimeter edits: new app-store wallet rules; bank KYC/AML memos; cloud policy templates; mining pool “best practices”.
Issuance mix: bill-heavy funding (to stabilize), coupon-heavy (to force discipline).
Legal posture: cross-border Memorandums of Understanding (MoUs), “model law” boilerplate, emergency powers extended.
Atonement via exceptions: who is blessed to violate rules (large intermediaries) shows the real hierarchy.
If statements contradict these artifacts, believe the artifacts.
Instruments the Controllers use to bend your revealed preferences
Defaults: pre-check the “right” choice (KYC wallets, cloud logging, auto-save to surveilled drives).
Friction asymmetry: one-click compliant vs 10-click sovereign.
Incentive skew: tax credits, rebates, lower fees - but only on rails the Controllers can inspect.
Ratcheting identity: bind more surfaces to ID (SIM, device, wallet, utilities).
Provenance everywhere: sign content, sign models, sign decisions → build a revocation layer.
Paperization: steer risk into wrappers the Controllers gate (ETFs, notes, custodians).
Narrative cover: safety, children, national security, climate - always overlapping, never expiring.
Selective enforcement: ignore noncompliance until the Controllers need leverage, then retroactively enforce.
Revealed preference vs Stated story
A) Money rails
Revealed: programmable, ID-bound payments become default (stablecoins/tokenized deposits first; CBDC later).
Stated: inclusion/innovation.
Tells: government disbursements pilots; travel-rule expansion; tax split at source; app-store wallet policy nudges.
B) Speech/information
Revealed: provenance, age-gating, fast take-downs via platforms; courts-ready evidentiary standards for “trusted media”.
Stated: safety, authenticity.
Tells: C2PA mandates; “lawful but awful” removal standards; CDN filters.
C) AI in operations
Revealed: admissible AI (lineage, approvals, rollback) > raw accuracy.
Stated: “responsible AI”.
Tells: procurement requiring audit artifacts; joint CIO–General Counsel sign-off.
D) Bitcoin containment
Revealed: permit store-of-value wrappers; slow medium-of-exchange via perimeters (app stores, banks, pools, taxes).
Stated: innovation with safeguards.
Tells: ETF approvals before coherent self-custody protections; pool “policy clients”; AML taxation ratchets.
Forecasts (3–5 years) if you follow revealed preferences
Stablecoin rails first, CBDC gravity later. Programmability normalized by private wrappers; ID-binding creeps in via incentives.
Admissibility becomes the moat. Platforms that produce signed, court-grade artifacts displace “move-fast” tools.
Provenance as a precondition. Major platforms and regulators require signed content/decisions by default.
Volatility management by wrapper. Sensitive assets (Bitcoin, carbon, bio) are paperized; peaks capped, floors defended.
Health/bio becomes policy tech. Continuous surveillance & automated clearances survive the next scare.
How the Controllers hide their preferences (so you don’t get fooled)
Dual-track policies: public “consultations,” private standards clubs (platforms, banks, primes).
Pilot sprawl: many small trials that share backends → looks organic, is coordinated.
Euphemism layering: rename controls every 12 months (safety → resilience → integrity → trust).
Outsource censorship: “self-regulation” with regulator-ready templates.
Charter sanctification: enshrine standards in quasi-independent bodies that outlive politicians.
Counter-measure for you: track plumbing, not headlines — budgets, Acceptable use Policy (AUP) updates, standards convergence.
Quick audit: stated vs revealed (use on any policy/market)
Budget: Did recurring spend increase? (Yes → revealed priority)
Default: Did the compliant path become one-click?
Perimeter: Did a platform/bank/cloud change Acceptable Use Policy (AUP)?
Standard: Did a provenance/identity rule become mandatory to interoperate?
Exception: Who was exempted? (That’s the true constituency).
Revealed preference examples for Financial Analysts
Paperize dissident assets rather than ban them.
Mechanism: ETFs, futures, custody funnels, pension eligibility with wrappers.
Result: Price discovery routes through supervised pipes; self-custody shrinks as a share.
Own the defaults, not the debates.
Mechanism: Pre-checked “security/compliance” settings in OS, clouds, banks, app stores.
Result: Opt-out costs rise until almost nobody does.
Shift law into Terms of Service.
Mechanism: App store, bank, ISP, cloud Acceptable Use Policy (AUP) updates; “policy clients”.
Result: Instant, border-less enforcement without legislatures.
Identity before liberty.
Mechanism: SIM/device attestation, eID, KYC wallet norms, real-name layers.
Result: Anonymity becomes a niche; revocation becomes routine.
Programmability over privacy.
Mechanism: Stablecoin/CBDC rails with spend rules, instant tax split, category caps.
Result: Money becomes a policy surface.
Provenance beats speech.
Mechanism: C2PA-style signing, watermarking, attestation chips.
Result: “Trusted” = signable/revocable; the rest is throttled.
Standards as soft law.
Mechanism: ISO/NIST/ENISA harmonization; “comply or explain” procurement.
Result: One template, many flags.
Emergency as operating mode.
Mechanism: Rolling declarations; sunset clauses that don’t.
Result: Fast-track procurement, durable controls.
Collateral is policy.
Mechanism: Haircuts, eligibility, HQLA definitions, central-bank facilities.
Result: Capital floods what’s blessed, starves what’s not - regardless of “value”.
Accounting is policy.
Mechanism: HTM/AFS relief, expected-loss models, fair-value toggles.
Result: Losses time-shifted; stability optics preserved.
Own the benchmark and you own flows.
Mechanism: Index committee rules, ESG flags, sector buckets.
Result: Inclusion = firehose; exclusion = drought.
Suppress with derivatives, not arrests.
Mechanism: Cash-settled futures, borrow terms, margin hikes, weekend liquidity gaps.
Result: Cap blow-offs, exaggerate down-moves; keep it “market driven.”
Selective illegality.
Mechanism: Rules exist for all; enforcement prioritized for targets.
Result: Chilling effect without legal clarity.
Classification as moat.
Mechanism: Secret annexes, cleared vendors, Authorization to Operate (ATO) lists.
Result: Incumbents compound; outsiders guess.
Procurement writes the product roadmap.
Mechanism: RFP verbs: attest, revoke, lineage, rollback.
Result: Only vendors with policy knobs can win.
Insurance as regulator.
Mechanism: Cyber underwriting checklists, exclusions, premium multipliers.
Result: Controls enforced by actuaries, not cops.
Deplatform at the payment layer.
Mechanism: Card network MCC bans, PSP AUPs, chargeback rules.
Result: Speech without spend is hobby, not movement.
E-invoicing = tax in the loop.
Mechanism: CTC (continuous transaction controls), real-time VAT split.
Result: Shadow economy shrinks; knobs multiply.
Meter the edge.
Mechanism: Smart meters, vehicle telematics, industrial IoT with remote cutoff.
Result: Demand is schedulable; rationing looks like optimization.
Sanctions as foreign policy UI.
Mechanism: Entity list propagation into ERP/AML stacks.
Result: Private firms self-police geopolitics.
Cloud sovereignty ≠ independence; it’s configurability.
Mechanism: Region locks, customer-managed keys, lawful intercept bridges.
Result: Same hyperscalers, local flags.
Kill switches > court orders.
Mechanism: API keys, certificate revocation, firmware flags.
Result: Immediate outcomes with plausible deniability.
Choke points > broad bans.
Mechanism: DNS/CA roots, baseband stacks, app distribution monopolies.
Result: Control with minimal noise.
Auditability over accuracy.
Mechanism: Model cards, data lineage, decision receipts.
Result: “Admissible AI” becomes the only deployable AI in power.
Make paper superior to bearer.
Mechanism: Tax treatment, custody requirements, reporting burdens on self-custody.
Result: Wrappers win; sovereign users dwindle.
Window the memory.
Mechanism: Right-to-be-forgotten, de-indexing, retention limits that cut only one way.
Result: History becomes a service level.
Complexity by design.
Mechanism: Layered compliance that requires middleware.
Result: DIY becomes impossible; platforms become inevitable.
Consent-for-cash swaps.
Mechanism: Subsidies, rebates, fee waivers on supervised rails.
Result: Opt-ins look like generosity; later they’re just normal.
Honeymoon → normalization → lock-in → harvest → ratchet.
Mechanism: Benefits first, defaults second, penalties third.
Result: Every “pilot” becomes permanence.
Model the world; then nudge it.
Mechanism: Full-system simulations, A/B policy in narrow geos, silent rollouts.
Result: The “surprising consensus” appears on schedule.
Monetize outrage, subsidize apathy.
Mechanism: Feeds amplify spectacle; bureaucracies optimize inertia.
Result: Energy burned in comment wars, not coordination.
Export the rules through vendors.
Mechanism: Multinationals bake compliance into default SKUs.
Result: Jurisdictional differences fade at the UX layer.
Policy as parameters, parameters as product.
Mechanism: Toggleable limits, attestations, audit hooks sold as SKUs.
Result: Governance scales like software.
Make the exit look like sabotage.
Mechanism: Frame self-custody, privacy, cash as risk vectors.
Result: Neighbors enforce the perimeter for you.
When in doubt, raise the fixed costs.
Mechanism: Certification, reporting, audits.
Result: Only scaled players survive — easier to steer a few big ships
Bottom line
Revealed preference is the only truth that pays.
Watch where the money, defaults, standards, and exemptions go. That’s the plan. If a narrative contradicts those four, it’s cover.
Ignore moral theater when plumbing tells you what’s next.
None of this should be considered investment advice.
I’ve written more about the State-Embedded Investment thesis in the following 2 articles:
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