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My current layman's opinion is that the current environment is a bubble, but that bubble is entirely independent of the technology itself.
It's clear that at least some people, in some circumstances, are getting value out of the technology. It's not like NFTs, where even the best use cases are better served by simpler, pre-existing tech.
That said, the current economic environment is baffling to me. Every big provider is acting like this is a zero sum game where one company winning will give them a monopoly forever. They're also acting like the progress curve will produce exponentially increasing capabilities forever while operating costs approach zero.
I'm not sure if the market as it stands can achieve profitability that justifies the current AI company valuations if there are 3-4 winners instead of one. They're all priced with the assumption that one of them will utterly own the most transformative technology since the steam engine. If that's not true, people are going to start asking why they're not getting a 10% return on a company that has a 20x P/S ratio. Once people start asking that question, it's going to get uncomfortable for anybody that's not a monopoly already.
They're taking on significant debt, too. Take meta, for example. If just one of their data centers has a twelve month delay, that's a ~3% hit to free cash flow to service debt on an asset that isn't making any money. When was the last time that you saw a construction project more complex than a doghouse finish on time and on budget? Even if they finish construction, there are significant delays getting them powered, and gas turbines aren't a permanent solution. There's pretty enormous systemic risk there. Some companies are better equipped to handle it than others, but none of them are immune. Oracle, in particular, appears to be laundering questionable debt through their investment grade credit rating, which is unlikely to end well for them.
That said, even if Anthropic and OpenAI shit the bed and contagion through the bond market causes a market crash, and Google puts their research back on the shelf, LLMs don't go away. Local models exist. China is still plugging along with much more reasonable objectives.
I don't know exactly what the future holds, but either way, it'll have LLMs in it.
Phenomenal take. I largely agree, although things look very different depending on where capabilities stall out.
I just listened to an uncharacteristically poor quality (maybe just Gell-Mann) Odd Lots episode where the economist said essentially he didn't think it would be revolutionary but would add 2-3% to growth.
Having our economies double in growth would be insane, I can't wait
Did he mean it as "increase growth from 2% to 4%", or "increase growth from 2% to 2.04%"?
I think his verbatim quote was something like "it will add 2-3% growth"
I doubt he meant 2% * 1.02 = 2.04% as that's incredibly small and he was otherwise rather bullish, but maybe he did
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As another example of that, consider the dot-com bubble: the internet didn't go away when the companies failed.
The comparisons to the dot com and railroad bubbles concern me sometimes.
A railroad line can last centuries if properly maintained. Fiber has a 20 - 50 year lifespan. They were both totally usable by the time everyone finally got over the mania. I'm not sure the same is going to be true about GPUs. The data center physical structures will exist, and maybe the power infrastructure, but even the (IMHO optimistic) projections on GPUs show a 6 year depreciation schedule.
Is that because they break down, or because four cycles of Moore's Law means that the newer ones are 16x as powerful? I know that consumer-grade GPUs running in consumer settings with consumer duty cycles last for more than six years, but I don't know how well professional grade ones in a server farm running 100% of the time last.
If we stall at the current capabilities, that's one thing. If we go back down to 2020-ish levels of compute availability, that's something else.
If we use Bitcoin as a reference, they tended to crap out after about 3 years because of blown capacitors.
Maybe things have improved?
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No, but most of the companies that went bust weren't ISPs but ancillary companies that had nothing to do with the Internet itself. Telecom definitely took a hit, but thatbwas due to optimistic demand projections that led to infrastructure build out that wasn't needed, not because they weren't charging customers enough. The current situation is like if they did what they did while offering everyone free access while undercharging people for faster connections. In any event, that build out was based largely on what the technology could already do, not what it theoretically might be able to do in the future. The money also wasn't nearly as much. The current situation is like if the ISPs were spending ten times as much money and were all unprofitable, and traditional telecom companies providing the same service were all losing money on it. In that case it's likely that Internet service would become hard to come by and expensive after the crash and it would have delayed the technilogy's adoption.
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