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Culture War Roundup for the week of October 13, 2025

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AI is Too Big to Fail

You've probably been hearing that we're in an AI bubble. I think that's both loaded and reductive, and I'd like to take some time to help people understand the nuances of the situation we're currently in, because it's deep. To be clear, I am pro AI as a technology and I have an economic interest in its success (and for reasons I'll discuss, so should you), however there is a lot more going on that I don't agree with that I'd like to raise awareness of.

AI capital investments are running far ahead of expected returns, and the pace of investment is accelerating. Analysts estimate AI-linked activity drove roughly 40–90% of H1-2025 U.S. GDP growth and 75–80% of S&P 500 gains. If it wasn't for AI investments, it's likely the United States would be in a recession right now. According to Harris Kupperman of Praetorian Capital “the industry probably needs a revenue range that is closer to the $320 billion to $480 billion range, just to break even on the capex to be spent this year.” It sure sounds like a bubble, however thinking of it as just another bubble would be doing a disservice to the magnitude of the dynamics at play here. To understand why, we have to explore the psychology of the investors involved and the power circles they're operating in.

The elites of Silicon Valley have cozied up to Donald Trump in a way that's unprecedented in the history of modern democracy. They've lined the pockets of his presidential library foundation, supported his white house renovations, paid for his inauguration and provided a financial lifeline for the Republican party. Between Elon Musk, David Sacks, Sriram Krishnan, Peter Thiel and his acolyte J.D. Vance, Trump has been sold the story that AI dominance is a strategic asset of vital importance to national security (there's probably also a strong ego component, America needs "the best AI, such a beautiful AI"). I'm not speculating, this is clearly written into the BBB and the language of multiple executive orders. These people think AI is the last thing humans will invent, and the first person to have it will reap massive rewards until the other powers can catch up. As such, they're willing to bend the typical rules of capitalism. Think of this as the early stages of a wartime economy.

[...]

I'm going to say something that sounds a little crazy, but please bear with me: from a geopolitical perspective, what we're doing is a rational play, and depending on how valuable/powerful you expect AI to be and how hostile you expect a dominant China to be, possibly a near optimal one. If you're a traditional capitalist, it probably looks like a bad move to you regardless of your beliefs about AI; you're going to need to put those aside. This is not a traditional economic situation. We're in an arms race, and we're veering into a wartime economy, or at least that's how the powerful view it.

[...]

Returning to the traditional capitalists, I'd like to note that they aren't wrong; this AI push is unsustainable (for us). I'm not sure how long we can run our economy hot and directed before the wheels come off, but my napkin estimate is between 5-10 years, though it's likely we'll lose the political will to keep pushing before that point if the AI transformation is underwhelming and we still have a democracy. To further support the traditional capitalists' position, if AI unwinds at that point having under-delivered, the economic damage will probably be an order of magnitude greater than if we had just let the bubble deflate naturally. This will be exacerbated by the favorable treatment the administration will make sure the Oligarchs receive; we will suffer, they will coast.

Where does all this leave us? For one, you better hope and pray that AI delivers a magical transformation, because if it doesn't, the whole economy will collapse into brutal serfdom. When I say magic here, I mean it; because of the ~38T national debt bomb, a big boost is not enough. If AI doesn't completely transform our economy, the massive capital misallocation combined with the national debt is going to cause our economy to implode.

I don't have the expertise needed to evaluate the economic arguments, so I'm mainly posting this here to solicit feedback on the linked article.

It's probably too late to avoid a future of "brutal serfdom" regardless of what happens, even if we reach singularity escape velocity. Power will do what it always has done, which is centralize in the hands of a few to the detriment of the many; turning every human into a cyborg god won't change that (you simply have the problem of organizing the coexistence of cyborg gods rather than the problem of organizing the coexistence of baseline humans). To think otherwise is to implicitly rely on a Rousseauean (and anti-Hobbesean, channeling Hlynka) presupposition that people are basically good and just and suffering is merely an incidental byproduct of material lack, which we have reason to be skeptical of. The second half of the 20th century provided what were probably the most fertile material and social conditions for freedom that have ever been seen in human history; regardless of wherever we're going now, we're leaving freedom in the rear-view mirror.

it could well be similar to how the dot-com investments worked out. lots of duds and even scams but on average i think the return on investing during that era was good and what it ended up producing was good. the problem is all of this is very risky and there is going to be a lot of failed investments in order to have some big payoffs. and of course the big players and everyone who thinks they have a chance is going to try and get the government to step in to subsidise their losses. but that doesn't mean the idea of AI is terrible or that we shouldn't be doing it.

Dotcom bubble was a bubble because there were no users. The reasoning was along the lines of 20% of all shoe sales in 2010 will be online. Company x has started to sell shoes online so in 10 years they will make billions. They had no sales and no where close to amazon's supply chain.

Chatgpt has millions of daily users. This is more akin to the boom of companies created when the world got smart phones. Those companies made money.

Dotcom bubble was a bubble because there were no users. The reasoning was along the lines of 20% of all shoe sales in 2010 will be online.

That really isn’t true. Plenty of dotcom companies like Yahoo had huge numbers of users; Yahoo had 400 million registered users at the peak in 2000 with 60 million monthly users (double the previous year’s figure). Many other dotcom companies had large user numbers too.

And if you look at the non-dotcom companies that still saw huge stock price crashes after the bust, many were businesses with big revenue, like Microsoft ($23bn in revenue in 2000, down 70%+ during the crash, didn’t recover until 2016) and Intel ($34bn in revenue in 2000, down 80%+ during the crash, didn’t recover until 2020). Both Intel and Microsoft were also extremely profitable during this period, contrary to boosters who say all tech stocks at this time lost money or whatever.

The bizarre myth that dotcom was all money into worthless internet businesses with 10 users and inflated traffic figures on zero revenue is peddled by exactly the same people trying to claim that “this time is different”.

It's even worse than that, because at least Yahoo and Microsoft had viable business plans and are still around years later. ChatGTP and other AI-only companies are more similar to Pets.com than the boosters want to realize. The news stories about the site's downfall always focused on the amount they spent on advertising, but they were selling the stuff they bought for less than what they paid for it, plus free shipping, in a bid to corner the market. ChatGTP is even worse because 97% of the users aren't paying anything, there is no advertising on the platform (and banner ads aren't going to cut it), and the 3% who do pay are likely power users who get more than their money's worth. So it's like if Pets.com gave 97% of their stuff away for free, sold the remaining 3% at a discount, and justified it by assuming that online shopping would be revolutionary and everyone would buy everything online. They were essentially right, they just went about it the wrong way to keep the spigot flowing. Add in spending large sums on infrastructure (i.e. warehouses vs. data centers) and the parallels are all too clear.