Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?
This is your opportunity to ask questions. No question too simple or too silly.
Culture war topics are accepted, and proposals for a better intro post are appreciated.
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Notes -
You can’t easily tax labor saving innovation. You can regulate it, which is what governments trying to protect jobs ultimately rely on (ban New Jersey from pumping its own gas, ban Brits from driving cars without a red flag being waved in front of them, ban autonomous taxis in NYC etc).
The first part of the question is about the actual profitability of AI providers. Most AI applications, especially a lot of basic white and blue collar labor (via multimodal models operating robotics) will be foundation model agnostic. You don’t need a frontier model to do customer support, so margins will be ground down by competition. It may even be that local models get good enough to do much of this pretty quickly, at which point it’s just compute with very little margin on top. For some applications, like cybersecurity or maybe some high frequency trading, having the highest performing LLM as fast as possible might allow some of the largest labs to eke out small, temporary high-margin windows immediately after big breakthroughs. But these will be short lived.
The second question is about the profitability of industries that replace workers with AI. Companies with extremely complex supply chains, very specialized and long lead time machinery that itself has long supply chains, and deep industry knowledge are arguably in a better position to automate without facing price pressure, therefore attaining higher margins. Even there, though, manufacturing margins are currently being hugely compressed by what’s happening in China, AI or not, and that’s likely to increase further. In addition, now SaaS is no longer as attractive, hundreds of billions in VC money is flowing into applied AI, and it’s arguably much easier to replicate and compete with that skilled business that’s been in the market for 30 years with AI, too.
The problem with western economies isn’t necessarily directly AI, even though a big employment shock is coming. It’s that huge sections of the economy haven’t gotten more efficient. We should be living in an age of hugely increasing across the board living standards but we aren’t because prices have been preserved by colossal regulatory job creation programs, some intentional and some not, primarily in healthcare and education, for over 40 years.
You end up with a world where AI can do everything but the government directly or indirectly employs 175,000,000 ditch diggers.
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