# Diffusion - The Economic Ledger (B2, B3, B5, B7) ← [B - Diffusion](README.md) · [Part VII](../README.md) --- Whether the technology shows up in the numbers firms and statisticians keep. The four indicators here share a design principle: each is built to survive the J-curve, reading dispersion, pricing structure, and relative moves rather than the aggregates that history says stay silent for a decade. ## B2 - Measured productivity | | | |---|---| | **Baseline** | No clear AI signal in aggregate TFP | | **Trajectory assumed** | J-curve; signal emerges 2029–32, not before | | **Trigger - fast diffusion** | Sustained US TFP growth >2%/yr before 2029 | | **Trigger - slow diffusion** | No signal by 2033 | | **Revises** | [2028–2032](../../04-timelines/2028-2032.md), [Part V](../../05-probabilities/README.md) row 2 | Expect this to say nothing for years. **That silence is the base case, not a surprise** - every general-purpose technology has shown the same lag, and reading early flatness as failure is the most common forecasting error in this literature. → [class 1](../../08-method/base-rates/cycles.md) **How to read without fooling yourself.** Prefer multi-year averages over single prints; prefer sector TFP in exposed industries (software publishing, business services, wholesale trade) as *leading* series that can move before the aggregate; treat quality-adjustment revisions as first-class events, because the BEA's deflators for software and cloud services are exactly where AI output is most likely to be mismeasured. A single strong quarter is not the trigger. Sustained >2%/yr means the J-curve has bent, not that a residual got lucky. ## B3 - Firm-level margin dispersion | | | |---|---| | **Baseline** | No large systematic margin lift at median adopters | | **Trigger - Red Queen confirmed** | Adoption rises, prices fall, margins flat | | **Trigger - Red Queen broken** | Sustained margin expansion at adopters in competitive industries | | **Revises** | [Game 3](../../02-games/3-firms.md) - the surplus-capture argument | This is the cleanest available test of the document's most contrarian claim. [Game 3](../../02-games/3-firms.md) predicts adoption without profit; the naive view predicts both. **Watch dispersion, not the mean** - if the gains accrue to the scarce complements, the mean stays flat while the top decile pulls away, which looks like nothing happening in aggregate data. **Practical series:** within-industry operating-margin interquartile range for competitive tradable sectors; gross margin vs. SG&A for software firms that report AI adoption; and the gap between "AI spend" survey series and earnings. The last gap is diagnostic of [over-adoption dissipation](../../02-games/3-firms.md) - boards spending under competitive fear without a measured return. ## B5 - Outcome-priced contracting | | | |---|---| | **Baseline** | Overwhelmingly seat- and token-priced | | **Trigger** | Material revenue share priced on delivered outcomes with liability attached | | **Revises** | [Capital](../../01-substrate/capital.md) revenue case; [Law](../../03-domains/cognitive/law.md); [Game 3](../../02-games/3-firms.md) | A sleeper indicator. Vendors will only accept outcome pricing when they believe reliability is real, and buyers will only pay it when they can attribute results. **The pricing model is a revealed belief about reliability** - more honest than any benchmark, because someone is betting on it. **What counts.** A contract that pays on resolved tickets, closed cases, or measured cost-down *with* a liability or indemnity clause attached - not "success fees" that are marketing language around seat licenses. Token and seat pricing can coexist for a long time; the trigger is a *material share* of vendor revenue, not the first pilot. This is also the cleanest external-demand signal for the [capital circularity](../../01-substrate/capital.md) problem: outcome revenue cannot be an echo of the capex loop the way cloud credits can. ## B7 - The two-economy price split | | | |---|---| | **Baseline** | Cognitive services soft or deflating; energy, shelter, care, trades firm or rising | | **Trigger - claim confirmed** | Sustained divergence: CPI/PCE components for software/info services fall or lag while energy+shelter+care outpace for 8+ quarters | | **Trigger - claim fails** | Uniform inflation or deflation across both baskets | | **Revises** | [Prices](../../09-macro/prices.md), [2028–2032](../../04-timelines/2028-2032.md), [Assets](../../09-macro/assets.md) | This is the macro expression of [Game 3](../../02-games/3-firms.md). Prefer **relative** component moves over headline CPI. Headline can look fine while both halves of the claim are true. **Basket construction.** Cognitive basket: software, information services, selected professional services where deflators exist. Physical/care basket: electricity and gas, owners' equivalent rent / rent of primary residence, medical care services, and repair/maintenance where available. Eight quarters of relative divergence is the bar so a single energy spike or software sale season cannot fire the claim. If [Uncertainty 7](../../06-uncertainties/complement-erosion.md) runs, the split narrows from the late 2030s as the inflating categories get manufactured - so a confirmed split that later closes is not a contradiction; it is a dated half-life. ## Joint readings | Pattern | Reading | |---|---| | B5 fires, B2 silent | Reliability believed by counterparties before statisticians measure it - still the base case early | | B3 Red Queen confirmed, B7 diverging | Surplus leaving competitive firms into complements and consumers - spine second half holding | | B2 fires early, B3 margins expand in competitive sectors | Either reorganization accelerated or the Red Queen is wrong - re-score row 2 and Game 3 together | | B7 uniform deflation | Complements eroding or demand collapsed; check [U7](../../06-uncertainties/complement-erosion.md) vs. recession before rewriting [prices](../../09-macro/prices.md) | | B3 margins expand only in licensed/concentrated sectors | Scope condition of Game 3 holding - not Red Queen broken | **Circularity filter for B5/A2.** Outcome revenue can still be partly circular if the "customer" is an equity affiliate. Prefer third-party enterprise contracts with public indemnity language over cloud credits between related parties. → [Capital](../../01-substrate/capital.md) --- **Related:** [Game 3](../../02-games/3-firms.md) · [Prices](../../09-macro/prices.md) · [Capital](../../01-substrate/capital.md) · [Labor and institutions](labor.md) **Next:** [The capability frontier](capability.md)