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Software giant Oracle corporation is laying off thousands of workers and killing their Texas data center plans, per Reuters and Bloomberg. It appears that their capital expenditures have gotten ahead of their ability to pay for them and now they face the regrettable need to say it out loud shortly before markets close on a Friday afternoon.
This may be indirectly tied to the Iran conflict as Mid East sovereign wealth funds have begun pulling back from investment.
I'm interested to see the fallout of this one. My understanding is that the Ellison clan is fairly tight with the Trump admin.
Beyond that, I have concerns that this may be the match that lit the fuse on AI spending. I have spent the last six months trying to figure out why these valuations made any sense whatsoever. The expense profile of companies like Anthropic and OpenAI looked a lot more like Caterpillar to me than Salesforce. When it came to Oracle, I couldn't make sense of it at all.
In terms of explanations, I only had three explanations I had were that I was:
I still don't know which one it is.
Some of you here are clearly smarter and more educated than me. What do you think I'm missing here? My gut prediction is that this spirals into an even bigger flight from capital in the next six months, which causes holy hell on the retail market because the average investor is more leveraged now than they have been at any point in my lifetime. I'm also assuming it'll kill quite a lot of "LLM Wrapper" companies, like the one run by fear porn expert Matt Shumer.
I assume Google will be OK.
Beyond that, I don't have any idea.
Any predictions?
How many important actors in the AI space need to be religious fanatics for it to start to alter the spending patterns?
There's some subset of people you run into who genuinely believe in the Singularity, that the moment AGI is cracked nothing else matters. The whole concept of worrying about debt load after your company cracks AGI is silly, if another company cracks AGI first then having good profit margins won't save you. If it ushers in the end times, or Gay Luxury Space Communism, worrying about whether you lied to shareholders? Stupid.
The religious fanatics will say whatever they need to in order to push ahead.
Believing that AGI is possible doesn't really require any kind of religion. Certainly it's speculative, but so is a belief that modular nuclear can reduce cost down to make starting a modular nuclear startup reasonable. really by this standard any startup is a religion. Really I think you're just sneering because you don't have any actual arguments. The argument in favor of AGI is reasonable and fits well into our general shared understanding of material reality. Maybe we'll find out that LLM architecture doesn't scale up to human level general intelligence and we can update our model, but that update requires information not in evidence.
I understand the cringe at @FiveHourMarathon likening it to religion, but there is something apocalyptic about the idea. Not in the sense that it's world-ending, but in the sense that there's something vaguely amazing that's supposed to happen that will change humanity, etc. How are we supposed to know when we've hit AGI? Sam Altman or whoever saying so isn't going to move the needle much, as it will just be perceived as a cynical marketing ploy. If it hits some benchmark that's great but I'm sure by some benchmark we had AGI in 2023. Besides, these benchmarks are all industry inventions, anyway.
OF course, no one in the industry would ever say that we've reached AGI, because that would instantly shut off the money spigot and expose them all as frauds, even if they are true believers. As soon as they describe a product as AGI the expectation level would skyrocket, as this is their supposed end goal, but when the sun goes up, sun goes down, moon goes up, moon goes down, and a month later they're still stuck with a 3% conversion rate, a trillion dollars in debt, and a product that the tech gurus all agree is slightly better than the last iteration, it's over. At that point, no one has any reason to give AI companies any more money.
So if it does happen, it has to happen in a big noticeable way that nobody can ignore. It also has to be an unalloyed good approaching luxury gay space communism, because if it's anything else, Altman et al. are fucked as well. I honestly don't understand the glee with which AI promoters predict that 50% of all "knowledge jobs" will disappear within a year. Hell, the Chief Legal Officer of Anthropic went to Stanford Law School earlier this year and basically told the students that they should all drop out. Do they not understand basic economics? Do they not understand that 50% of the highest-paid workers getting laid off in a year's time would create an economic disaster the likes of which we've never seen? Do they not understand that this will have a ripple effect into non knowledge-work, as cratering demand combined with an employment glut would reduce jobs and depress the salaries of the jobs that remained? Do they not realize that many of the enterprise clients they depend on to pay full-freight for this product will be out of business? Do they not realize that everyone whom they owe money to will also be in a tight spot and will expect to be paid the full amount of the money owed? Do they not realize that the AI companies themselves are likely to go bankrupt in such a scenario? It has to be a messianic vision, because it can't be anything else.
People keep accusing them of having glee at this but I don't really see any of this glee. They seem sober and worried about this happening and are practically begging policymakers to come up with some frameworks for how to cope with that future. The same people who accuse these claims of being gleeful then go on to say that saying policy needs to be set up to cope with mass unemployment is hype rather than genuine concern. I don't like defending particularly altman of all people but you really do seem to have them in an impossible position. What can someone truthfully say if they believe AGI is possibly imminent?
The problem I have is that they don't act like they believe AGI is imminent. They say they do because they have to; if they didn't then people would stop giving them money. Just take the legal industry; Anthropic released a report earlier this year that claimed 88% of all legal tasks could be automated by AI, though only a small percentage of those tasks were actually being automated by Anthropic's customers. Meanwhile, they're telling students at a top law school that they should learn to splice cable or something because first year associate jobs will be automated away. Aside from the confidentiality concerns of Anthropic monitoring law firm AI use, and the fact that first year associates have been useless for as long as they've existed, Anthropic's own hiring practices do not suggest that 88% of legal work can be automated away by AI.
I can't find reliable totals for how many lawyers Anthropic employs, but they hired 24 last summer, and I'm sure they had some on the payroll prior to that. A gander at their website also shows several open positions, though these all have different titles and multiple offices listed, so it might be more of a constantly hiring situation. I can't find reliable estimates on their total employee count, but I've seen everything from 2500 to 4500 employees. If they currently have 30 lawyers working for them and 3,000 total employees, that's one lawyer for every 100 employees. That's, to put it mildly, and insane ratio. For comparison, Wal-Mart has 155 in-house attorneys and 2.1 million total employees. FedEx has 60 in-house attorneys for 370,000 US employees. Tech companies have higher ratios, but not that high; Apple and Google are in the 1/200–300 range. These numbers are estimates, of course, and I'm not trying to make the argument that Anthropic doesn't need all these lawyers or that they're hiring more than necessary. My point is that AI doesn't seem to have reduced their reliance on in-house attorneys in comparison to other companies, and this is at a company that should, and supposedly is, having their attorneys make extensive use of their AI tools.
The other thing is that when you look at these job openings, they all have extensive experience requirements. The lowest I saw was 3 years experience, and a few required 10 to 12 years. This is common for in-house positions. There were also a bunch of oddly specific experience requirements, which are often more in the "nice to have" category than anything else. The one requirement that was common to all positions and obviously non-negotiable is that the candidate have an active license in at least one state. Now, I am licensed in three states, and meet absolutely none of the other requirements, though I have been working for 10 to 12 years in wholly unrelated fields. Something tells me that if I were to apply for one of these jobs and somehow got an interview, telling the hiring team that I had mad AI skillz that would allow me to complete 88% of my work and get up to speed on the remaining 12% quickly would not impress them. Then again, being a true believer was one of the requirements, so who knows.
Can you lay out exactly what you'd expect them to be doing if they thought AI was imminent? I don't really think they'd be bothering worrying about pinching the salary of 30 employees if they thought ai was imminent. I also don't think in house lawyers really scales the way you're implying. 30 lawyers gives you what? 3 teams of lawyers? You're doing a lot of lobbying because you're a major player in new tech so one of those teams is your lobbying arm, one is working on corporate mergers and acquisitions(I'm sure they're trying to buy some kind of image model team), and one is probably cooking up stuff on what they're liable for/keep the lights on legal work. It's just not the kind of thing you scale linearly with employees.
I'm not saying they have too many lawyers. I'm saying that if their products were as good as they claim they are, they'd be able to make do with fewer lawyers. They claim 88% of legal tasks can be automated, and legal employees are among the most expensive. What kind of advertising is that? You can use our software to automate your legal work and save! Except we have more lawyers on the payroll than the industry average, and when litigating we hire white shoe firms whose lawyers are of the type who have their secretaries print things out for them. If the technology isn't saving Anthropic any money then why should we believe it will save anyone else money?
You can cite all the reasons why you think Anthropic needs a bigger legal department, and maybe they do, but keep in mind that there are other companies that have other unique issues that Anthropic doesn't have to deal with. For instance, they don't get sued all that often. I represent a subsidiary of a global machinery company based in Japan that got sued a dozen times last month. For one thing. In one jurisdiction. They're getting sued somewhere, for something, multiple times per day. The US arm of the parent company, whom you've certainly heard of, has five people in its in-house legal department. To be fair to Anthropic, once a company starts getting sued constantly they usually hire national coordinating counsel to manage their litigation for them, but they still have to prepare assignments to local counsel and accept service, and do all the other boring things that come with the territory, as well as monitor the litigation and grant settlement authority.
Anyway, of the six openings they're advertising, two deal with vendor contracts, one with datacenter construction, one with customer contracts, one with international compliance and one with "frontier" issues, i.e. problems that don't exist yet and don't have clear answers. M&A and lobbying are the kinds of things that get contracted out and that the in-house team doesn't do much hands-on work with. It's more like the counsel would occasionally meet with/provide reports to a senior member of the legal team, maybe a junior member occasionally supervising it, but not something anyone is doing full time.
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