Unpopular opinion but this will not as bad as housing bubble and we’re way past bubbles actually popping in contemporary economy. Even China corrected for its massive ghost city housing bubble just recently and that was actually worse than ai tech overvaluation.
This turned out a little bit long. I wonder if anyone will bother reading it.
A lot of this so-called ‘bubble’ is based on capital expenditure in support of a technology that probably doesn’t have the capability AI company ceo’s claim, but does have fascinating, and in terms of how society is currently arranged possibly extremely harmful, potential.
I know what ai companies have done, and what they are likely to do, in the pursuit of profit is shit; I would say that is a capitalism and fascist billionaire issue, rather than a tech issue but ymmv.
And there is the energy consumption problem. I think ai ceo’s and tech broligarchs would privately say ‘compare the energy consumed by my datacentre to the energy consumed by the workers it has replaced and you will see it is fairly efficient…’ (I am saying what I expect they think, not what I agree with).
The concern that the economy currently has all of its eggs in the ai basket seems reasonable, but I see why capital is betting on it as big as it is. Any concerns regarding the economic disruption of an ai bubble popping is nothing compared to what could happen if 50%+ white collar workers are made redundant. We saw the number of essential workers needed per 1 million people during covid: it wasn’t many. Most jobs exist because the people exist to do them, corralled into the pyramidal structure of capitalism, where money trickles upwards. AI might push us into an era where the people exist but the jobs do not.
Anyway, I see this ‘bubble’ as being like the dotcom bubble, which didn’t kill the web when it popped. The gpu’s this capital expenditure has paid for are going to continue to be used, even as this economic period shakes itself out. They aren’t just going to evaporate. It isn’t like worthless debt being packaged up and resold without a chance of it being recouped, even if the prospect of what can be achieved with AI is currently over-valued.
Comparing to the dotcom bubble is what finally made it make sense in my brain. Though I know the toll it took on that sector’s workers and I don’t envy those in fields that are going to be affected the same way.
The 2008 housing bubble was predicated on cheap lending. It was all debt. It was massive amounts of toxic debt sold around Wall Street, like using Trump Coin or counterfeit cash used to buy a house.
The vast majority of what’s happening here is not debt. Sure, some, but very little. Even the OpenAI AMD stock swap thing is swapping a gamble on stocks worth real money, not debt.
IMO the first sub-bubble to pop will be all the time and effort wasted on “Startups” that are nothing more than a couple people acting as a wrapper for an AI agent. That’s not really going to impact the economy too much on its face, but suddenly a lot of people are going to go from being “entrepreneurs” to being truly unemployed.
Edit: Also, just saw this gem, and THIS is how you get a supercharged 2008 repeat, bank deregulation and $2.6 trillion in lending. Which is exactly how we got to 2008’s subprime lending.
Yes, contemporary economy and free markets are so imaginary now that cascading effects and bubble pops like 2008 are very unlikely. American stock market in particular is so far off reality (even before AI boom) that it’s basically a video game with no actual relevancy to true gross product. While China/Russia is a dictatorship with no representation of reality at all and can easily hide the burden of bad economic policies in the obedient peasant class.
So we have dictatorship with imaginary worlds vs “free markets” living in their own imaginary simulation. Economy is all made up now and cascades are basically impossible because that requires rationality.
The problem isn’t the imaginary market, which I agree with the description. Its the leveraging of debt, to gamble in the market, which is what low interest rates enable.
And yes, our interest rates are VERY low still. I’m looking at some ARM packages right now, and their max lifetime interest rates are on par with what a typical mortgage was about a decade ago.
Perfect explanation, also; since 07 thing where the hedge bros were not punished, there stopped existing any incentive to imagine any scenario where anyone lose any money due to bank runs
It was a textbook bubble. They made and gambled on theoretical apartments where nobody involved had any intention of living there or any responsibility or connection to the underlying structure, to the point where building cardboard skyskrapers became a business… the is no point in denying it. Capital housing investment is a plague on humanity.
There are always bad actors in the system (see: hedge funds). But bubble? It can be argued that Ordos (the ghost city) was build too early, but it’s filling in nicely. From 30k in 2009 to 2.000.000+ in 2020.
Unpopular opinion but this will not as bad as housing bubble and we’re way past bubbles actually popping in contemporary economy. Even China corrected for its massive ghost city housing bubble just recently and that was actually worse than ai tech overvaluation.
This turned out a little bit long. I wonder if anyone will bother reading it.
A lot of this so-called ‘bubble’ is based on capital expenditure in support of a technology that probably doesn’t have the capability AI company ceo’s claim, but does have fascinating, and in terms of how society is currently arranged possibly extremely harmful, potential.
I know what ai companies have done, and what they are likely to do, in the pursuit of profit is shit; I would say that is a capitalism and fascist billionaire issue, rather than a tech issue but ymmv.
And there is the energy consumption problem. I think ai ceo’s and tech broligarchs would privately say ‘compare the energy consumed by my datacentre to the energy consumed by the workers it has replaced and you will see it is fairly efficient…’ (I am saying what I expect they think, not what I agree with).
The concern that the economy currently has all of its eggs in the ai basket seems reasonable, but I see why capital is betting on it as big as it is. Any concerns regarding the economic disruption of an ai bubble popping is nothing compared to what could happen if 50%+ white collar workers are made redundant. We saw the number of essential workers needed per 1 million people during covid: it wasn’t many. Most jobs exist because the people exist to do them, corralled into the pyramidal structure of capitalism, where money trickles upwards. AI might push us into an era where the people exist but the jobs do not.
Anyway, I see this ‘bubble’ as being like the dotcom bubble, which didn’t kill the web when it popped. The gpu’s this capital expenditure has paid for are going to continue to be used, even as this economic period shakes itself out. They aren’t just going to evaporate. It isn’t like worthless debt being packaged up and resold without a chance of it being recouped, even if the prospect of what can be achieved with AI is currently over-valued.
Comparing to the dotcom bubble is what finally made it make sense in my brain. Though I know the toll it took on that sector’s workers and I don’t envy those in fields that are going to be affected the same way.
I’ve been saying the same thing.
The 2008 housing bubble was predicated on cheap lending. It was all debt. It was massive amounts of toxic debt sold around Wall Street, like using Trump Coin or counterfeit cash used to buy a house.
The vast majority of what’s happening here is not debt. Sure, some, but very little. Even the OpenAI AMD stock swap thing is swapping a gamble on stocks worth real money, not debt.
IMO the first sub-bubble to pop will be all the time and effort wasted on “Startups” that are nothing more than a couple people acting as a wrapper for an AI agent. That’s not really going to impact the economy too much on its face, but suddenly a lot of people are going to go from being “entrepreneurs” to being truly unemployed.
Edit: Also, just saw this gem, and THIS is how you get a supercharged 2008 repeat, bank deregulation and $2.6 trillion in lending. Which is exactly how we got to 2008’s subprime lending.
Most of what is going on in the AI sector is most certainly debt leveraged. Like, I’m looking at the books for several companies deep into AI.
I mean, how much profit is OpenAI turning right now?
Can you explain how we’re beyond bubbles like I’m 5? Is it that there are gentler market corrections now?
Yes, contemporary economy and free markets are so imaginary now that cascading effects and bubble pops like 2008 are very unlikely. American stock market in particular is so far off reality (even before AI boom) that it’s basically a video game with no actual relevancy to true gross product. While China/Russia is a dictatorship with no representation of reality at all and can easily hide the burden of bad economic policies in the obedient peasant class.
So we have dictatorship with imaginary worlds vs “free markets” living in their own imaginary simulation. Economy is all made up now and cascades are basically impossible because that requires rationality.
The problem isn’t the imaginary market, which I agree with the description. Its the leveraging of debt, to gamble in the market, which is what low interest rates enable.
And yes, our interest rates are VERY low still. I’m looking at some ARM packages right now, and their max lifetime interest rates are on par with what a typical mortgage was about a decade ago.
Perfect explanation, also; since 07 thing where the hedge bros were not punished, there stopped existing any incentive to imagine any scenario where anyone lose any money due to bank runs
Idk if ghost city thing was a bubble tho.
China used planned infrastructure and bunch of confused journalists in US were like “what kind of government plans for housing of their citizens”
It was a textbook bubble. They made and gambled on theoretical apartments where nobody involved had any intention of living there or any responsibility or connection to the underlying structure, to the point where building cardboard skyskrapers became a business… the is no point in denying it. Capital housing investment is a plague on humanity.
There are always bad actors in the system (see: hedge funds). But bubble? It can be argued that Ordos (the ghost city) was build too early, but it’s filling in nicely. From 30k in 2009 to 2.000.000+ in 2020.
https://en.wikipedia.org/wiki/Ordos_City
On the other hand noone ever build a damn whole modern city before for the people, so I’m not surprised they jumped the gun.
I mean even if it was planned the amount of excess given falling birthrates, doesn’t check out either.
Ah yes “the stoopit west har har” propaganda lol
I was mostly going for “modern journalism is is sad and biased towards clickbait” ngl. Especially now they have AI edited articles.