When Cloudflare Went Down, I Saw the Collapse of “Digital Central Planning.”

Yesterday afternoon, when the dreaded “502 Bad Gateway” error simultaneously lit up millions of screens around the world, I didn’t frantically hit refresh like everyone else.

Instead, I quietly closed my laptop, poured myself a whiskey, and watched the physical street. Cars merged and pedestrians crossed in a chaotic but functional dance — no central server required. The contrast was mocking.

At that moment, Twitter (X) was wailing, Discord servers had fallen silent, and crypto exchange charts flatlined like a patient whose heart had stopped.

My friend — a “Full Stack Engineer” at a major Silicon Valley firm — texted me in a panic: “Cloudflare is down. The internet is over.”

He was wrong. The internet wasn’t over. What was over was our arrogant fantasy of building a digital utopia based on “Centralized Efficiency.”

I don’t view this Cloudflare outage (whether caused by a BGP routing error or a power failure) as a mere technical glitch.

I view it as a Hayekian Moment.

It was a violent market correction against excessive centralization, the artificial suppression of redundancy costs, and the “Too Big to Fail” phenomenon in technology.

We are witnessing the “Central Bank” moment of the digital world, and most people haven’t even realized they have become serfs in this new feudal system.

The Invisible Leviathan: The Trap of Efficiency

To understand how a single company’s configuration error could instantly vaporize 20% of global web traffic, we must first understand how the word “Efficiency” has been corrupted.

To a Keynesian, efficiency is the maximization of resources. To a Silicon Valley VC, efficiency is “Scaling.”

In the pursuit of lightning-fast load times, rock-bottom bandwidth costs, and unified security, internet architects made a fatal trade: We sold decentralized resilience to buy centralized efficiency.

Cloudflare has metastasized from a mere Content Delivery Network (CDN) into the Central Clearing House of the digital economy.

Imagine a free market with millions of merchants where everyone decides to stop trading directly. Instead, they route every contract, shipment, and payment through a single middleman because he promises, “If you use my lane, shipping is free, and I’ll fight off the robbers.”

Sounds tempting, right? This is exactly the trap Ludwig von Mises warned us about.

When all traffic funnels through a single node, we are no longer building a network; we are building a hierarchy.

The original intent of the internet — the ARPANET design meant to survive a nuclear strike through decentralization — has been voluntarily neutered.

We have replaced the spontaneous order of countless independent nodes with a Soviet-style Central Planning Bureau (Cloudflare’s dashboard).

Yesterday’s outage was not a failure of technology; it was the inevitable result of Structural Fragility.

Digital “Fractional Reserve Banking”

In finance, Austrians despise “Fractional Reserve Banking” because banks lend out far more money than they actually hold in reserve. This creates a false boom until the bank run happens.

In tech, we are running a “Digital Fractional Reserve System.”

Countless startups, SaaS platforms, and even government websites are “borrowing” Cloudflare’s credibility and infrastructure.

• They haven’t built their own DDoS mitigation.
• They haven’t configured Multi-cloud redundancy.
• They don’t control their underlying BGP routing.

They have “outsourced” all their security and availability to a single entity, assuming that entity is infallible.

This is a classic case of Moral Hazard.

Because Cloudflare’s services are so cheap and powerful (many are free), it artificially depresses the real cost of maintaining a high-availability website.

What does this lead to? It leads to Malinvestment.

If the true actuarial cost of maintaining 99.99% uptime is $1,000 a month, but Cloudflare suppresses the price signal to near-zero, we don’t get efficiency.

We get a bubble of fragile businesses that exist only because they are being subsidized by systemic risk.

When the tide goes out (Cloudflare goes down), we see who is swimming naked.

These businesses didn’t fail because of “Force Majeure”; they failed because they had been surviving on an unsustainable cost structure subsidized by a centralized giant.

The Fatal Conceit: Why Centralization Is Doomed

F.A. Hayek taught us in The Use of Knowledge in Society that no central planner can possess the localized knowledge dispersed among all individuals.

The same logic applies to internet routing.

What Cloudflare attempts to do is, in essence, manage global information flow via an algorithm. They try to optimize billions of requests through a single control plane.

This is what Hayek called “The Fatal Conceit.”

No matter how brilliant their engineers are, no matter how advanced their AI is, as long as it is centralized, it has a single point of failure.

When a bleary-eyed engineer in San Francisco fat-fingers a routing table, that error doesn’t stay local. It is instantly replicated across hundreds of data centers globally.

This “synchronicity” is viewed as a miracle of efficiency in good times, but in a crisis, it is the fuse for systemic collapse.

Decentralized systems (like the Bitcoin network or the early internet) are clunky, redundant, and sometimes inefficient.

But they are Antifragile. If a Bitcoin node goes down, the network doesn’t blink.

Our current Web2.0 architecture, as Nassim Taleb would say, is designed to perform like a Ferrari 99% of the time, but shatter like glass in the remaining 1% of crises.

Who Benefits? The Digital Cantillon Effect

In monetary economics, the Cantillon Effect states that new money doesn’t flow evenly; those closest to the printer benefit first.

We see a similar effect in digital infrastructure.

When Cloudflare went down, the internet didn’t turn off for everyone equally.

• Massive enterprise clients have dedicated support lines and redundant backbones.
• Tech giants like Google or Amazon, which pay for their own private infrastructure, were largely unaffected.
• Who got hit the hardest? The small businesses, personal blogs, and DeFi front-ends that rely entirely on Cloudflare’s free tier.

This exacerbates digital class stratification.

The outage served as a brutal reminder: If you don’t own the infrastructure, you are not a citizen of the internet; you are a digital serf living on the Lord’s estate.

The web is becoming increasingly like the modern financial system — a few “Too Big to Fail” institutions control the plumbing, and the rest of us just pray they don’t clog the pipes.

Conclusion: The Painful Necessity of Regression

When the screens lit up again and the green “200 OK” status codes returned, the masses cheered. Tech media will publish a bland “Post-Mortem Analysis” blaming a rogue router or a bad deploy.

Then, it will be business as usual.

But that is exactly what scares me the most.

We have normalized this fragility. We have traded our sovereignty for convenience.

The prescription is never sweet. The only solution to this problem is a painful regression.

We need to return to a more “expensive,” more “hassle-prone,” but robust internet architecture:

• Localism First: More data should be stored at the edge, not aggregated in the center.
• True Polycentrality: Reject Vendor Lock-in and diversify your dependencies.
• The Renaissance of Self-Hosting: Relearn how to control your server, even if it means learning how to configure Nginx yourself.

This Cloudflare outage was not an accident; it was a warning shot.

It was the sound of the digital foundation groaning under the weight of centralization.

If you choose to ignore this signal and continue betting your livelihood on a single centralized giant, then when the next outage hits — when the real “Black Swan” arrives — don’t call it bad luck.

Because in my eyes, there is no luck. There is only Cause and Effect.

Seriously, back up your data while the network’s still running! Seriously, back up your data while the network's still running!